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Highlights
Durables orders fell back in April as overall new factory orders for durables declined 3.6 percent, following a revised 4.4 percent jump in March (previously estimated at up 4.1 percent). April's decrease was worse than the median forecast for a 3.0 percent fall. Excluding transportation, new orders slipped 1.5 percent, following a 2.5 percent rise in March. Weakness in the latest month was broad-based but also followed a broad-based jump in March. This series is living up to its reputation as one of the most volatile monthly data series.
Weakness in the latest month was led by transportation equipment which dropped a monthly 9.5 percent in April after a 10.3 percent boost the month before. By subcomponents for April, nondefense aircraft plunged 30.0 percent (essentially a fall in Boeing orders); defense aircraft & parts decreased 8.9 percent; and motor vehicles declined 4.5 percent. The auto industry apparently has been harder hit than initially believed by parts shortages due to the earthquake and tsunami in Japan. Motor vehicle orders were up 6.6 percent in March and sales have continued at healthy levels through April.
Outside of transportation, weakness was widespread. Declines were seen in primary metals, down 1.6 percent; fabricated metals, down 1.1 percent; machinery, down 3.4 percent; electrical equipment, down 4.9 percent; and "other" durables, down 1.0 percent. Computers & electronics orders rose 0.7 percent.
Business investment in equipment has been volatile also. Nondefense capital goods orders excluding aircraft in April fell back 2.6 percent, following a 5.4 percent jump the month before. Shipments for this series slipped 1.7 percent, following a 3.7 percent rise in March.
Clearly, the latest durables report is disappointing but not so much in the context of its volatility and the strong gain in March. Also, Boeing orders certainly will rebound as will auto orders once supply disruptions ease. While there is some uncertainty, given overall demand and low inventories, durables orders and production are more likely than not to pick up strength in coming months.
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Market Consensus before announcement
Durable goods orders in March surged a revised 4.1 percent (benchmark revisions) after declining 1.1 percent the month before. Excluding transportation, new orders gained a revised 2.3 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. Early indications for April are mixed according to durables orders indexes in various manufacturing surveys. The ISM eased but remained at a strong level though the Empire State index softened more significantly and the orders index for Philly slowed sharply.
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