Durable goods orders in March declined less than expected but February's sharp gains were whittled down substantially in revisions. Durable goods orders fell back 0.8 percent in March, following a 2.1 percent rebound in February. The prior month's increase originally had been estimated at 3.5 percent. However, the drop in March was not as severe as the market forecast for a 1.8 percent fall. Excluding the transportation component, new orders decreased 0.6 percent, after advancing 2.0 percent in February.
Weakness in new orders was widespread in the latest month but was led by communication equipment, down 8.1 percent, and primary metals, down 3.2 percent. The only major industry group to post a gain was electrical equipment & appliances which rebounded 1.8 percent.
By special category, nondefense capital goods rose for the second consecutive month, increasing 1.9 percent in March after a 4.9 percent boost the prior month. But these orders are still recovering from January's sharp 9.9 percent plunge.
Year-on-year, overall new orders for durable goods slipped to down 25.2 percent in March from down 24.8 percent in February. Excluding transportation, new durables orders declined to down 20.3 percent from down 18.3 percent the prior month.
The latest durables report showed a partial pullback in durables orders but over the past two months there has been a net gain. Overall, the numbers indicate that contraction in manufacturing may be slowing – which still is good news. The "may" part has to be heavily considered since durables orders are notoriously volatile. Also, we certainly will have to pay more attention over the next few months to ex-transportation since auto manufacturers are shutting down some assembly lines due to weak sales and high inventories.
Market Consensus before announcement
Durable goods orders rebounded a revised 3.5 percent in February after falling 7.8 percent in January. The rise in durables showed wide gains across components though against easy comparisons with very weak January data. Looking ahead, we are likely to see slippage for March. The new orders indexes in the latest manufacturing surveys for ISM, Philly Fed, and New York Fed improved but remained in negative territory.