Durable goods orders in the US dropped by 2.8% in July, which is better than the predicted 4.0% decrease. In June, there was a significant decline of 9.4%. When excluding transportation, durable goods increased by 1.1%, surpassing the 0.2% estimate. Additionally, June’s numbers were revised to show a 0.3% rise, up from the previous estimate of 0.2%. When looking at orders without defense, there was a 2.5% decline, less than the expected 3.6% drop. The decline from the prior month was also slightly revised from -9.4% to -9.5%. Non-defense capital goods excluding aircraft grew by 1.1%, beating the 0.2% projection. June’s figures were updated from a -0.8% to a -0.6% decrease.

Trends In Durable Goods

Durable goods orders have fallen in three of the last four months, with notable weakness in the transportation sector this July. However, when transportation is excluded, orders rose by 1.1%. Overall orders decreased by 2.5% when defense orders are removed. Still, defense orders have risen, possibly due to government strategies aimed at boosting military exports. By focusing on business investments in equipment and ignoring aircraft, analysts can better understand future economic activities and corporate confidence, essential for GDP growth. The increase in core capital goods in July is encouraging, although there is still volatility, particularly in last month’s revisions. As of August 26, 2025, this July report on durable goods suggests that the expected economic slowdown might not be as severe as feared. The headline drop of 2.8% is better than the anticipated 4.0%, providing some relief to equity markets. This positive outcome could ease some of the bearish sentiment that had built up recently. The significant 1.1% rise in core capital goods orders is a strong indicator of business investment. It shows that, despite economic worries, businesses are continuing to invest in equipment, which is a good sign for future corporate earnings and GDP. This counters the narrative that the economy is headed for a hard landing, a view that many had started to embrace.

Implications For Federal Reserve Policy

This resilience complicates the forecast for Federal Reserve policy, making it less likely that interest rate cuts will happen soon. The last Consumer Price Index (CPI) report for July 2025 showed inflation stubbornly at 3.1%. Strong business spending gives the Fed the ability to keep its current policy stance. We may need to adjust strategies that anticipated an immediate shift towards looser monetary policy, such as selling September SOFR futures contracts. The mixed signals—a weak headline number but a strong core—are likely to create more market uncertainty. We’ve noticed the VIX rise to around 19 this past week, and this report will likely keep it stable. This environment is good for traders looking to buy volatility through options, such as straddles on the SPX index, to benefit from potential price swings in either direction. The data also highlights specific sector performance, showing an increase in defense orders. This supports a positive outlook on the aerospace and defense sector, prompting a look at call options on major defense contractor stocks or ETFs like ITA. On the other hand, ongoing weakness in the transportation sector, which pulled the headline number down, calls for caution in that area. It’s essential to remember the volatile nature of this data, as indicated by the fluctuating numbers throughout late 2023 and 2024. One month of strong business investment doesn’t change the broader trend of declining orders over three of the last four months. Therefore, while this report supports some tactical bullish adjustments, it is too soon to bet on a steady economic rebound. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now