New orders for U.S. manufactured durable goods rose 0.3% mom in June, returning to positive territory after May's revised -4.0% decline but falling short of expectations for a 1.6% increase. Excluding transportation, orders increased 0.6%, also below the 0.9% consensus, while orders excluding defense edged up 0.3%. Although the headline figures disappointed, the report showed business investment remained on a positive footing rather than slipping back into contraction.

The underlying details were broadly constructive. Durable goods orders have now increased in three of the past four months, suggesting May's sharp decline was more of a setback than the start of a sustained downturn. Technology-related demand continued to stand out, with computers and electronic products rising 3.1%, marking gains in nine of the past ten months. The sector's strength highlights continued investment in digital infrastructure and advanced manufacturing, helping offset softer performance elsewhere.

Overall, the report points to moderating rather than weakening manufacturing activity. The slowdown from April's surge and May's sharp correction suggests order growth is normalizing, while positive readings in both headline and core measures indicate business spending remains resilient.

Economic Data Summary

Key Takeaways

• US durable goods orders returned to growth in June, rising 0.3% m/m after May's revised 4.0% decline, although the rebound fell well short of market expectations.
• Underlying business investment remained resilient. Orders excluding transportation increased 0.6%, while orders excluding defense also posted a 0.3% gain, indicating manufacturing demand continued to expand despite a slower pace.
• Technology remained a bright spot. Orders for computers and electronic products rose 3.1%, extending gains to nine of the past ten months and highlighting continued investment in digital infrastructure and advanced manufacturing.
• The report suggests normalization rather than deterioration. Durable goods orders have now increased in three of the last four months, implying May's sharp decline was more of a correction following April's surge than the start of a sustained downturn.

Full US durable goods orders release here.

Germany's business sentiment improved further in July, with the Ifo Business Climate Index rising to 86.6 from 85.7 in June as companies grew more optimistic about the months ahead despite ongoing uncertainty surrounding the conflict in the Persian Gulf. The improvement was driven entirely by stronger expectations, while firms were slightly less satisfied with current business conditions. The latest survey suggests German companies are becoming increasingly confident that activity will recover, even if that improvement has yet to fully materialize.

Manufacturing led the gains, with business confidence rising noticeably as expectations strengthened and demand picked up. Companies also reported easing material shortages, although their assessment of current conditions softened somewhat. The services sector likewise became less pessimistic about the outlook despite a slightly weaker view of present business. Trade confidence improved again, supported by better assessments of both current conditions and future prospects, with retailers becoming less concerned about business performance. Construction also showed further signs of stabilization as both current assessments and expectations improved, while fewer firms reported insufficient order books.

Taken together, the survey points to a broad-based improvement in confidence across Germany's economy, extending the gradual recovery seen in recent months. The contrast between stronger expectations and weaker assessments of current conditions suggests businesses see better conditions ahead but remain cautious about the near-term environment. While the Ifo survey alone is unlikely to materially alter European Central Bank policy expectations, it supports the view that Germany's economy is stabilizing despite persistent geopolitical risks and a still challenging growth backdrop.

Survey Details

Key Takeaways

• German business confidence rose for a third consecutive month, with the Ifo Business Climate Index increasing to 86.6 from 85.7, its highest level since February.
• The recovery was driven by expectations rather than current activity. Expectations jumped to 86.7 from 84.3, while assessments of current business conditions edged down to 86.5 from 87.0.
• Manufacturing showed encouraging signs of improvement, with stronger demand and easing material shortages supporting confidence despite softer assessments of current conditions.
• Confidence improved across all major sectors, including services, trade and construction, suggesting the recovery is becoming more broad-based.
• Companies appeared less concerned about geopolitical risks, with the Ifo Institute noting firms were less pessimistic despite continued uncertainty surrounding the Persian Gulf.
• For markets, the survey supports the narrative of a gradual German economic stabilization, but the divergence between stronger expectations and weaker current conditions suggests the recovery is still in its early stages and is unlikely to materially alter ECB policy expectations on its own.

Full German Ifo release here.

European Central Bank Governing Council member Peter Kazimir from Slovak reinforced the hawkish bias on Monday, arguing that policymakers will likely need to raise interest rates at least once more and warning that a worsening energy shock could ultimately require even more tightening than markets currently anticipate. His remarks come just days after the ECB left policy unchanged while signaling that another move is likely at its September meeting as renewed Middle East tensions push oil and gas prices higher.

Kazimir said he "remain[s] of the view that at least one more hike will be needed as part of our measured adjustment to inflation risks," adding that this would be justified "even if the situation improves somewhat." He also set a high bar for changing that view, saying "very convincing" economic data and geopolitical developments would be needed over the coming weeks for him not to support a September rate increase. More importantly, Kazimir argued the ECB should act before higher energy costs feed through to broader inflation, warning that second-round effects "often form quietly" and that policymakers must "act before that point, not after."

He also opened the door to a more aggressive tightening cycle if the energy shock intensifies. "Should the situation escalate, with the price pressures becoming stronger and more persistent, we will need to tighten more over the next quarters than is currently expected," he said. That aligns with the ECB's recent emphasis on monitoring whether higher energy prices evolve into broader and more persistent inflation pressures rather than treating them as temporary supply shocks. Kazimir added that "we did not surprise the markets in July, and we should not surprise them in September," reinforcing the ECB's preference for preparing markets ahead of major policy moves.

ECB Governing Council member Ante Žigman of Croatia echoed that cautious approach in a separate interview, saying uncertainty "remains high" and that the impact of the latest energy shock "will only be seen in the coming months." He stressed that the "intensity and duration of the shock are crucial" and reiterated that future decisions would depend on incoming data and updated projections while keeping the ECB's medium-term objective of inflation around 2%.

Together, the comments suggest policymakers remain firmly on course for another rate hike while leaving open the possibility of additional tightening should energy-driven inflation prove more persistent than currently expected.