Durable Goods Orders Plunged In March, Worse Than Expected

by: Doug Short

The April Advance Report on March Durable Goods was released this morning by the Census Bureau. Here is the Bureau's summary on new orders:

New orders for manufactured durable goods in March decreased $13.1 billion or 5.7 percent to $216.3 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 4.3 percent February increase. Excluding transportation, new orders decreased 1.4 percent. Excluding defense, new orders decreased 4.7 percent.

Transportation equipment, also down two of the last three months, led the decrease, $11.0 billion or 15.0 percent to $62.4 billion. This was led by nondefense aircraft and parts, which decreased $8.5 billion.
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The latest new orders number at -5.7 percent was below the Briefing.com consensus of -3.1 percent. Year-over-year new orders are up a fractional 0.5 percent.

If we exclude transportation, "core" durable goods were down 1.4 percent. Year-over-year core goods are down 0.3 percent.

If we exclude both transportation and defense, durable goods were up 0.4 percent. Year-over-year core ex-defense goods are up 2.6 percent.

The first chart is an overlay of durable goods new orders and the S&P 500. We see an obvious correlation between the two, especially over the past decade, with the market, not surprisingly, as the more volatile of the two.

An overlay with unemployment (inverted) also shows some correlation. We saw unemployment begin to deteriorate prior to the peak in durable goods orders that closely coincided with the onset of the Great Recession, but the unemployment recovery tended to lag the advance durable goods orders.

Here is an overlay with GDP — another comparison I like to watch closely.

The next chart shows the percent change in orders with and without transportation since the turn of the century.

Now let's exclude defense orders.

And finally, let's look at core durable goods orders, excluding both Transportation and Defense.

In theory the durable goods orders series should be one of the more important indicators of the economy's health. But its susceptibility to major revisions of the previous monthly data suggests caution in taking the data for any particular month too seriously.