Durable Goods

Durable goods orders fell 0.8% in March compared to forecasts for a 1.5% decline. Excluding transportation orders, durable goods orders fell 0.6% compared to forecasts for a decrease of 1.2%. Revisions to past months reduce the shine of the data; revisions to the overall tally totaled 1.8 percentage points and revisions to core orders were 2.5 percentage points. Despite the revisions, the two-month change for durable goods orders is now +1.3% and 1.4% ex-transportation. This is far better than the previous four months, when orders fell a cumulative 24.9% overall and 21.2% excluding transportation orders. The sharp contrast hence qualifies the durables data as having stabilized, relatively speaking.

Orders for non-defense capital goods orders ex-aircraft, a key gauge of capital spending, increased 1.5% following a 4.3% gain in February. These are the first back-to-back increases since last June and July. Keep in mind, however, that orders for this category have fallen to a dollar value of $51.56 billion from a peak of $67.8 billion, a 24% decline, so there is a long way to go before reaching a full recovery.

Nevertheless, the concept of recovery alone is what financial markets are feeding on at present. Later, sustainability and the depth of recovery will guide market prices, limiting gains in riskier assets.

Shipments of non-defense capital goods orders ex-aircraft were weaker than orders (because of lagged effects), falling 1.7% following a 0.1% gain in February. Shipments, not orders, are used as source data in computations for GDP, suggesting a fifth consecutive quarter of decline in spending on equipment and software. The decline will nonetheless be far smaller than the fourth quarter's 28.1% rate of decline.