Manufacturing regained some of its luster with today's durables report. New factory orders for durables surged 2.5 percent in March after rising a revised 0.7 percent the month before (previously estimated at down 0.6 percent). The latest figure topped the consensus forecast for a 1.9 percent boost. Excluding transportation, new orders gained 1.3 percent, following a 0.6 percent increase in February. The March advance was led by transportation (mainly motor vehicles) but gains were widespread elsewhere also.
Transportation equipment jumped 5.9 percent, following a 0.9 percent increase in February. By subcomponents, motor vehicles advanced 3.7 percent; defense aircraft & parts increased 6.3 percent; and nondefense aircraft edged up 0.9 percent. The motor vehicles portion is the largest subcomponent by far, making up 60.7 percent of transportation new orders in the latest month.
Outside of transportation, gains were widespread. On the upside were primary metals, up 3.9 percent; machinery, up 4.2 percent; electrical equipment, up 3.1 percent; and "other" durables, up 1.6 percent. Declining were fabricated metals, down 2.3 percent, and computers & electronics, down 1.1 percent.
Business investment in equipment regained some strength. Nondefense capital goods orders excluding aircraft in March increased 3.7 percent, following a 0.5 percent rise the prior month. Shipments for this series jumped 2.2 percent, following a 0.4 percent rise in February. The latest boost in shipments will have economists nudging up their forecast for the business equipment investment component in first quarter GDP.
Overall, the durables report is encouraging and suggests that the first quarter ended with strength even though on average the quarter likely was softer than the final quarter of 2010.
Market Consensus before announcement
Durable goods orders in February dipped a revised 0.6 percent (originally down 0.9 percent), following a 3.6 percent rebound in January. Excluding transportation, new orders for durable goods decreased 0.3 percent (first estimate at down 0.6 percent) after a 3.0 percent drop in January. Transportation led February's decrease, slipping 1.5 percent after a huge 29.7 percent jump in January. Outside of transportation, the numbers were mixed.