Orders for U.S.-manufactured durable goods (items meant to last at least three years) rose in March by $6.4 billion (2.6 percent) to $254.9 billion, according to new data from the Census Bureau. That was better than expected and the February figure was revised higher. Most of the strength, though, was due to a 44.5 percent jump in commercial aircraft orders, while “core” durable goods orders, which exclude the volatile transportation component, rose by much less than forecast. Moreover, orders for nondefense capital goods excluding aircraft, i.e. core capital expenditures, an important proxy for U.S. business investment, fell by 0.1 percent in March. That is significantly worse than the 0.6 percent gain economists expected and will likely cause some analysts to lower their projections for Q1 gross domestic product (GDP) growth ahead of tomorrow’s release of the government’s first official estimate.
Elsewhere, manufacturing activity in the Midwest region of the country expanded this month at the fastest pace of the current business cycle, according to the Federal Reserve Bank of Kansas City. However, many surveyed managers cited the recent tariffs and overall trade uncertainty as major concerns going forward. Much more discouraging is manufacturing activity in the Mid-Atlantic region of the country, which slowed significantly this month, according to a new report from the Federal Reserve Bank of Richmond. Specifically, the headline activity gauge plunged to -3.0 in April, the largest monthly decline in nearly a year and significantly worse than expected. In fact, this was the first negative (contractionary) reading since October 2016, with most of the weakness due to sharp declines in shipments, new orders, and capacity utilization. Margin strain also worsened in April, as prices paid continued to rise faster than prices received. On the bright side, capital expenditures and wages both increased this month to record levels. The latter, though, is likely a response to the tightening labor market, as many surveyed managers continued to report “difficulty in finding necessary skills.”
Sources: Econoday, U.S. Census Bureau, FRBSLPost author: Charles Couch