Insights 
VT 
Durable goods orders in the US fell by 2.8% in July, better than the forecasted 4.0% decline. In contrast, June experienced a substantial drop of 9.4%. Excluding transportation, durable goods improved by 1.1%, exceeding the 0.2% prediction, and June’s data was revised to a 0.3% rise, from an earlier 0.2% estimate.
Orders excluding defence dropped by 2.5%, less than the anticipated 3.6% decrease. The prior month saw a minor revision from -9.4% to -9.5%. Non-defence capital goods excluding aircraft increased by 1.1%, against a 0.2% estimate, with June’s figures amended from a -0.8% to a -0.6% drop.
Trends In Durable Goods
Durable goods orders declined in three of the last four months, with transportation sectors notably weak this July. However, without transportation, orders saw a 1.1% rise. Removing defence orders, overall orders decreased by 2.5%, but defence-related orders have increased, possibly aligning with past government strategies to enhance military exports.
By excluding aircraft, which can skew data, and focusing on business investments in equipment, analysts derive insights into future economic activities and corporate confidence, which contribute to GDP growth. The July increase in core capital goods is positive, though volatility persists, especially evident in previous month revisions.
As of today, August 26, 2025, this July durable goods report suggests the feared economic slowdown may be less severe than we anticipated. The headline drop of 2.8% was better than the -4.0% consensus, which should provide some immediate relief to equity markets. This beat on expectations could temper some of the more bearish positions we’ve seen build up over the last few weeks.
The most critical figure for us is the 1.1% jump in core capital goods orders, a strong proxy for business investment. This indicates that despite broader economic concerns, businesses are still spending on equipment, a positive sign for future corporate earnings and GDP. This challenges the narrative that the economy is heading for a hard landing, which many had started to price in.
Implications For Federal Reserve Policy
This resilience complicates the outlook for Federal Reserve policy, making near-term interest rate cuts less likely. With the last CPI report for July 2025 showing inflation stubbornly holding at 3.1%, this strong business spending gives the Fed room to maintain its restrictive stance. We should therefore adjust positions that were betting on an imminent dovish pivot, perhaps by selling September SOFR futures contracts.
The conflicting signals—a weak headline number but a strong underlying core—are likely to increase market uncertainty. We’ve already seen the VIX creep up to hover around 19 this past week, and this report will likely keep it elevated. This environment is favorable for traders looking to buy volatility through options, such as straddles on the SPX index, to profit from potential price swings in either direction.
The data also points to specific sector performance, with a clear increase in defense orders. This reinforces a bullish outlook on the aerospace and defense sector, and we could look at call options on major defense contractor stocks or ETFs like ITA. Conversely, the persistent weakness in the transportation sector, which dragged the headline number down, suggests continued caution in that area.
We must remember the volatile nature of this data, as we saw with the choppy readings throughout late 2023 and 2024. One month of strong business investment does not reverse the broader trend of declining orders in three of the last four months. Therefore, while this report allows for tactical bullish adjustments, it is too early to position for a sustained economic re-acceleration.
