New orders for durable goods rebounded with a 3.3% gain in April after a sharp drop in March, the Census Bureau reports. That's more than double the expected gain, according to the median forecast from economists, as compiled by Bloomberg. Business investment (capital goods orders less aircraft and defense) also increased last month, posting a 1.2% advance. The bigger story in today's release is that both series appear to be stabilizing, based on year-over-year comparisons. Is this a sign that the long stretch of decelerating growth for new orders has finally run its course?
Last month is certainly an improvement vs. March. For the first time since October 2012, both headline orders and new business investment advanced. The April gains are modest, but the fact that new orders gained on a broad basis is encouraging.
There are also signs that the year-over-year pace for orders overall may be stabilizing. It's too soon to say for sure, but the possibility that somewhat better days on this front may be coming is a bit more plausible today. By contrast, reviewing this series has been a dark affair for the past year or so, with the annual rate fading for some time, including dips into negative territory in recent updates. Some analysts said this was a sign that the business cycle was falling off the proverbial cliff. But a broad review of the economy never supported that prediction. Instead, the overall trend has remained upbeat, as last week’s profile of the Economic Momentum & Trend indexes once again reveals.
In short, modest growth overall still dominates. That’s been the general macro narrative all along, albeit with some bumps along the way. Perhaps today’s update on durable goods orders reflects a closer alignment with the broad trend, which has been and remains clear on one theme: recession risk remains low and the economy writ large is expanding at a slow to modest rate, based on the latest numbers. It's an old story but one that's been fairly consistent, even if it hasn't been obvious when looking at durable goods orders in isolation.