Implications: Nothing to get too excited about, either way. After healthy gains in the first quarter, orders for durable goods declined for the second straight month in May, falling by the most in six months, showing business investment will not be a key driver of economic growth in Q2. Orders for durable goods fell 1.1% in May after falling a revised 0.9% decline in April. Aircraft orders, both commercial and for the defense sector, led the decline in May. Strip out the typically volatile transportation sector and durable goods orders rose 0.1%, although that's still short of the consensus expected gain of 0.4%. That smaller than expected gain in non-transportation orders was led by machinery, which may come under pressure in the next few months given the recent decline in energy prices. Non-transportation orders have been steadily trending higher since mid-2016 – up 5.5% in the past year. Other disappointing news today was that "core" shipments, which exclude defense and aircraft, and are important for calculating the equipment component of GDP, declined 0.2% in May. Plugging this into our models suggests "real" (inflation-adjusted) equipment spending will be up at about a 2% annual rate in Q2. It now looks like companies may be waiting for Washington to make progress on tax reform and other issues, before making any significant longer-term decisions. In the meantime, economic growth continues to plow ahead at a moderate pace.
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