Durable goods orders for March rose 0.8% following a downward revision in February from -2.8% to -3.1%.
Motor vehicle orders fell a steep 3.0%.
Shipments declined 0.5% but core capital goods shipments rose 0.3%. Core capital goods revisions were hugely negative.
The Bloomberg Econoday consensus was 1.6%, double the reported number.
Highlights
The factory sector posted a respectable March with orders for durable goods up 0.8 percent which follows a revised downswing of 3.1 percent in February and a very solid 4.3 percent gain in January. March reflects a big gain for defense goods which helped offset a downward swing for commercial aircraft. A negative in the report is a 3.0 percent decline for motor vehicle orders reflecting weakness at the retail level.
Data on core capital goods orders are uninspiring, unchanged for new orders in March to extend a soft trend. Shipments for this series, which are inputs into GDP, inched 0.3 percent higher but follow outright declines in the first two months of the quarter.
Shipments in March fell 0.5 percent and unfilled orders fell 0.1 percent. Manufacturers are carefully watching inventories for unwanted builds keeping inventories flat in the month and the inventory-to-shipments ratio unchanged at 1.66.
The benefits of the lower dollar and higher energy prices have yet to give the factory sector much lift, at least they didn’t in March though there are hints in anecdotal reports of emerging strength in April.
Recent History
The dollar may be depreciating and oil prices may be stabilizing, but they have done very little – at least so far – to hold up durable goods orders which fell a steep 2.8 percent in February including a very weak 1.0 percent decline when excluding transportation equipment (and related month-to-month volatility in aircraft orders). Forecasters do see a bounce for March, at plus 1.6 percent for the main headline and at plus 0.5 percent for ex-transportation orders. Readings for core capital goods orders, including both orders and shipments, proved very weak in February and a lack of rebound in March would point to further erosion in business investment and continued weakness in productivity growth. Still, strength tied to the decline in the dollar, which will help exports, and to higher oil prices, which will boost energy equipment, appear certain to give a lift to the factory sector, sooner than later.
Mixed Report, Weaker Than It Looks
Bloomberg called the report “respectable”.
This was a mixed report but details show the reports was much weaker than it looks on the surface.
Strength led by defense spending is hardly encouraging. Autos down 3% does not bode well for consumer spending. And what about core capital goods.
“Uninspiring”
Core capital goods shipments rose 0.3%. However, core capital goods orders were flat after a huge downward revision in February from -1.8% to -2.7%.
Year-to-date core capital goods are down 2.5%. Excluding transportation, orders are down 1.4%.
In recent history, Bloomberg correctly noted “Readings for core capital goods orders, including both orders and shipments, proved very weak in February and a lack of rebound in March would point to further erosion in business investment and continued weakness in productivity growth.”
In today’s report Bloomberg glossed over the huge downward revision simply as “uninspiring”.
This report was much weaker than it appears at first glance based on the “respectable” headline number.
Mike “Mish” Shedlock
Why does Bloomberg always insist on putting lipstick and mascara on a pig? Even I can see it is still a pig!
Their subscribers are primarily sell siders who need “unbiased” news to convince their mooches ooops clients.
I am quetioning the term “durable goods”. Listening to customers as of recent, things like refrigeratos, dishwahers, ect, have become expendables soon after delivery. Is there a durable good worthy of the catagory?
I don’t know. I have been running the same refrigerator for over 20 years now (knock on wood). But definitely have not had as much luck with the dishwasher…
There is a segment of consumers that are too quick to give up on an appliance when a minor repair is needed. 3 repairs on the range and one on the clothes dryer and dishwasher (spared another replacement) are still a fraction of replacement cost of any one of them. It just took a little time, a few dollars on spares and some YouTube.
I have Maytags in the laundry room, circa 1999, Maytag dishwasher circa 1990. I repaired each at least 2 times. Neighbor down the street bought all new appliances when they moved in 4 years ago, and they have fond a new pastime repairing and replacing them since. Junk, just pure junk.
A few things
Core capital goods orders truest measure here of economy.
For March listed as 0.0% month over month
But February revised lower, if not March would have been negative. March core orders weaker than March 2015 AND March 2014. Year to date core orders -1.1% over 2015. Q1 2015 GDP only +0.6%.
February 2016 initial core orders … $67.350 billion
February 2016 revised core orders … $66.880 billion
March 2016 initial core orders … $66.877 billion
https://research.stlouisfed.org/fred2/series/NEWORDER
3 of the last 4 months shipments are down AND undelivered (open) orders down. New orders means NOTHING – they can be cancelled before shipped.