New orders for durable goods rose 1.8%, following a 1.8% gain in April. This is very encouraging news and gives some hope for a second-half rebound in the economy.

Still, new orders can be very volatile from month to month, and as the graph below shows, orders are still way off on a year-over-year basis. Perhaps a better way to look at the data is on a year-to-date basis.

New orders for the first five months of 2009 are 26.8% lower than for the first five months of 2008. While new orders rose for the month (a good leading indicator), shipments of durable goods (an important coincident indicator) fell by 2.1% following declines of 0.5% in April and 1.9% in March.

The declines in April and May do not bode well for the second quarter GDP report. On a year-to-date basis, shipments are down 19.3%. This is a significantly smaller decline than that of new orders on a year-to-date basis. Presumably, goods have to be ordered before they are shipped, so we probably still have several more months of declining shipments to catch up with new orders.

The new order data can be greatly influenced by big orders for aircraft. After all, it just takes a few orders for a new Boeing (BA) 777 to make up for declines in many other areas. This is indeed what happened this month, with orders for civilian aircraft jumping 68.1% -- but that is coming off an extraordinarily low level. On a year-to-date basis, even with the jump in May, civilian aircraft orders are down 73.1% on a year-to-date basis.

The other part of civilian transportation goods, motor vehicles and parts, saw an 8.1% decline in new orders and is down 31.4% on a year-to-date basis. This is not good news for companies like Paccar (PCAR).



The other good news in the report was an increase in non-defense capital goods orders excluding aircraft. This is a good proxy for business capital spending, which is an important (and volatile) part of GDP. Also known as core capital goods orders, it rose by 4.8% for the month, but is down 24.0% on a year-to-date basis.

One area that showed very significant strength for the month was in orders for Computers and related products, which saw a 9.4% increase, reversing declines of 6.6% in April and 4.6% in March. On a year-to-date basis computer orders are down 21.0%. Still, count this rebound as good news for companies like International Business Machines (IBM) and Hewlett Packard (HPQ).



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