The numbers: Orders for passenger planes and other long-lasting products rose again in June even as manufacturers grappled with broad shortages of supplies and labor that are preventing a robust U.S. economic recovery from being even stronger.
Orders for durable goods climbed 0.8% last month, the government said Tuesday. Economists polled by the Wall Street Journal had forecast a 2% uptick. Business investment also rose for the 13th time in the last 14 months.
The increase fell short of Wall Street expectations mostly because new orders in the prior month were revised upwards. Bookings in May were revised up to show a 3.2% gain instead of 2.3%.
A resurgent U.S. economy has ignited an explosion in demand for cars, computers, consumer electronics and all sorts of goods, but it’s created its own problems — big shortages in both supplies and labor.
These shortages are likely to persist through the end of the year. That could choke off some of the growth in the economy and retard the recovery.
Big picture: Businesses have plenty of orders. They just can’t fill all of them right away.
Take automakers. They’ve had to delay production of some models because they don’t have enough computer chips to complete them.
The shortages have driven up the cost of supplies and pushed companies to try to pass these costs onto customers by charging higher prices. All of this has added to the biggest burst of inflation in the U.S. since at least 2008.
The Federal Reserve contends the price increases will fade by next year as the shortages go way and the U.S. and global economies return to normal, but for now they are causing plenty of headaches.
Key details: Bookings for commercial aircraft jumped 17% in June. After a year of cancellations, orders for Boeing
are rising again. People are flying more frequently and airports are no longer virtual ghost towns like they were early in the pandemic.
Orders for new autos, which have been up and down this year, slipped 0.3% in June.
Omitting cars and planes, new orders rose a smaller 0.3% last month.
Outside of transportation, orders also increased for primary metals, electronics, machinery and networking gear. Bookings declined for fabricated-metal parts and computers.
Business investment, meanwhile, advanced a solid 0.5% for the second month in a row. These so-called core orders are viewed by investors as a signal of future business prospects.
Investment has surged this year as business prepare for stronger growth in a post-pandemic world. A lack of skilled labor is also pushing companies to adopt more automation to handle work previously performed by people.
In the 12 months ended in June, investment has leaped by more than 18%.
What they are saying? “Business investment is on a powerful upswing even if consumer spending has downshifted from the earlier blistering, rebates-stoked pace,” said senior economist Sal Guatieri of BMO Capital Markets.
Market reaction: The Dow Jones Industrial Average
and S&P 500
fell in Tuesday trades and appeared headed for the first decline in five days.