July 2016 Economic Indicators
Melanie Garza - Director of Strategy and Growth
Durable Goods Slips
New orders for durable goods fell 2.3% in May, following two consecutive monthly increases. In April, durable goods orders climbed 3.2%.
Transportation equipment came in with the largest drop of -5.7%. Automobiles slipped -6.3% in May, following a -0.9% drop in April. New orders for automobiles are down -5.7% from a year ago. Construction machinery orders also fell -1.7%. Commercial aircraft order climbed 6.7% while defense aircraft surged 20.8% in May after falling -23.2% in April.
New orders for industrial machinery also fell -8.7% coming off of a 1.2% gain in April. Metals continued to decline with new orders dropping -0.6% while fabricated metals experienced a slight increase of 0.2%.
CEO Confidence Rises
CEO confidence in the U.S. is rising and now reflects a positive reading. The Conference Board Measure of CEO Confidence™ measures CEO confidence quarterly. In the second quarter, the index measured at 52, up from 47 in the first quarter. A reading of more than 50 points reflects more positive than negative responses.
CEOs’ assessment of current economic conditions improved somewhat, with 21% saying conditions are better compared to six months ago, up from about 19% last quarter. Business leaders’ appraisal of current conditions in their own industries was considerably more favorable, with 30% stating conditions in their own industries have improved, up from 18% in the first quarter.
Meanwhile, CEOs’ short-term outlook continued to improve, with about 25% expecting better economic conditions over the next six months, up from 18% last quarter. The outlook for their own industries was also more favorable, with nearly 33% of CEOs anticipating an improvement in conditions over the next six months, up from 22% in the first quarter.
A total of 75% of CEO’s expect profits will rise over the next 12 months. Leaders in the nondurable industries are the most optimistic, with 90% expecting profits to rise. About seven out of ten CEOs in the nondurables and services industries expect an increase in profits.
Of the surveyed executives who expect an increase in profitability, 41% say cost reductions will drive the increase, while 35% expect market/demand growth and 14% acknowledge new technology. A total of 10% attribute increased profits to price increases.
Questions or comments? Please contact Melanie Garza at mgarza@teamCOACT.com