U.S. Durable Goods Orders Fell 1.7% In April Vs 1.4% Fall Expected

by Ike Obudulu Posted on May 25th, 2018

Washington, D.C., USA: U.S. durable goods data for the month of April released today by the Census Bureau of the U.S. Department of Commerce shows a decline of 1.7% month to month. U.S. durable goods orders were expected to decline 1.4 percent in April, after rising 2.6 percent a month earlier.

Overall orders for durable goods dropped 1.7 percent in April as demand for transportation equipment tumbled 6.1 percent.

New orders for key U.S.-made capital goods increased more than expected in April, however, and shipments rebounded.

The data suggested business spending on equipment was picking up after slowing down at the end of the first quarter.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 1.0 percent in April. The increase in the core capital goods orders reversed March’s 0.9 percent drop.

Core durable goods orders was expected to climb to 0.5%, but the markets braced for a decline of 1.4% from durable good orders.

According to Wells Fargo, durable goods orders were  expected to have fallen 2 percent given a fall in Boeing orders.

In the prior month, durable goods orders had come in mixed as large gains in aircraft orders masked softness in other categories of business investment for the month.

New Orders

New orders for manufactured durable goods in April decreased $4.2 billion or 1.7 percent to $248.5 billion, the U.S. Census Bureau announced today. This decrease, down following two consecutive monthly increases, followed a 2.7 percent March increase. Excluding transportation, new orders increased 0.9 percent. Excluding defense, new orders decreased 1.9 percent. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $5.6 billion or 6.1 percent to $87.1 billion.

Shipments

Shipments of manufactured durable goods in April, down following eight consecutive monthly increases, decreased $0.1 billion or 0.1 percent to $246.7 billion. This followed a 0.7 percent March increase. Transportation equipment, down following three consecutive monthly increases, drove the decrease, $1.8 billion or 2.1 percent to $82.8 billion.

Unfilled Orders

Unfilled orders for manufactured durable goods in April, up five of the last six months, increased $5.5 billion or 0.5 percent to $1,153.4 billion. This followed a 0.8 percent March increase. Transportation equipment, also up five of the last six months, led the increase, $4.2 billion or 0.5 percent to $796.2 billion.

Inventories

Inventories of manufactured durable goods in April, up seventeen of the last eighteen months, increased $1.2 billion or 0.3 percent to $401.7 billion. This followed a 0.2 percent March increase. Fabricated metal products, up fifteen of the last sixteen months, led the increase $0.4 billion or 0.8 percent to $52.0 billion.

Capital Goods

Nondefense new orders for capital goods in April decreased $5.7 billion or 6.8 percent to $78.6 billion. Shipments decreased $3.6 billion or 4.6 percent to $74.1 billion. Unfilled orders increased $4.5 billion or 0.6 percent to $713.9 billion. Inventories increased $0.8 billion or 0.5 percent to $176.1 billion. Defense new orders for capital goods in April increased $0.3 billion or 3.1 percent to $11.0 billion. Shipments increased $1.4 billion or 12.9 percent to $12.0 billion. Unfilled orders decreased $1.1 billion or 0.7 percent to $144.7 billion. Inventories decreased $0.3 billion or 1.4 percent to $22.2 billion.

Revised and Recently Benchmarked March Data

Revised seasonally adjusted March figures for all manufacturing industries were: new orders, $498.4 billion (revised from $498.3 billion); shipments, $492.6 billion (revised from $492.2 billion); unfilled orders, $1,147.8 billion (revised from $1,148.2 billion) and total inventories, $664.8 billion (revised from $664.3 billion).

Figures in text are adjusted for seasonality, but not for inflation. Figures on new and unfilled orders exclude  data for semiconductor manufacturing. “Virtually unchanged” indicates that the change is less than 0.05 percent for a percent increase or decrease.

What else is on the economic docket?

The University of Michigan’s consumer sentiment index for May is scheduled for release at 10 a.m. Eastern.

Investors will hear from several Fed officials on Friday, including Chairman Jerome Powell, who will appear on a panel on financial stability and central bank transparency at a conference in Stockholm at 9:20 a.m. Eastern.

The presidents of the Chicago and Dallas Feds, Charles Evans and Rob Kaplan, are expected to speak on a panel at a Dallas Fed conference on technology and disruption at 11:45 a.m. Eastern.

The Manufacturers’ Shipments, Inventories, and Orders (M3) survey or the Durable Goods Orders Report

The Manufacturers’ Shipments, Inventories, and Orders (M3) survey or the Durable Goods Orders Report provides broad-based, monthly statistical data on economic conditions in the domestic manufacturing sector. The survey measures current industrial activity – change in the total value of new purchase orders placed with manufacturers for durable goods – and provides an indication of future business trends.

The data can be volatile and revisions via the Factory Orders report released about a week later are not uncommon. Moving averages should be used to identify long-term trends.

Durable goods are generally defined as higher-priced capital goods orders with a useful life of three years or more

Durable goods are defined as hard products (capital goods) having a life expectancy of three years or more years, such as automobiles, computers, appliances, airplanes, semiconductor equipment and turbines.

The report is issued monthly by the Census Bureau of the U.S. Department of Commerce.

‘Actual’ greater than ‘Forecast’ is good for the dollar and vice versa.  A weak durable goods report will also generally lead to a decline on the bond market.

Core Durable Goods Orders Report

Core Durable Goods Orders report measures change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation items.

Orders for aircraft are volatile and can severely distort the underlying trend. The Core data is therefore thought to be a better gauge of purchase order trends;

Why Markets Care About Durable Goods Orders Report

It is  a leading indicator of production – rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.

A durable goods report showing an increase in orders is a sign that the economy is trending upwards. This can be a sign of gains in the stock market.

Durable goods orders tell investors what to expect from the manufacturing sector, a major component of the economy.

The Durable Goods Report gives more insight into the supply chain than most indicators, and can be especially useful in helping investors get a feel for earnings potential in the most represented industries: machinery, technology, manufacturing and transportation.

It provides forward-looking data such as inventory levels and new business, which count toward future earnings.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
Phone
Email

Leave a Reply