Durable goods orders reflect the new orders placed with domestic manufacturers for immediate and future delivery of factory hard goods. The first release, the advance, provides an early estimate of durable goods orders. About two weeks later, more complete and revised data are available in the factory orders report. The data for the previous month are usually revised a second time upon the release of the new month's data. (Bureau of the Census, U.S. Department of Commerce) Why Investors Care
| Released on 4/24/08 For Mar 2008 | ||||||||||||
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Highlights
Durable goods orders in March continued to decline but at a slower pace and with weakness concentrated in transportation. Durable goods orders slipped 0.3 percent in March, following a 0.9 drop in February, and fell well short of market expectations for a 0.6 percent gain. However, excluding the transportation component, new orders rose 1.5 percent in March, following a 2.1 percent fall the month before.
Weakness in transportation was led by declines in defense capital goods and in motor vehicles. While demand for motor vehicles has weakened in recent months and justifies the dip in orders, the same cannot be said for defense capital goods. That category is simply volatile on a monthly basis. Declines in March were also seen in communications equipment and in electrical equipment. But importantly, most industry categories rebounded in the latest month. These included primary metals, fabricated metals, machinery, and "other" durables.
Nondefense capital goods orders made a partial rebound in March, rising 1.5 percent after falling 0.3 percent and 7.7 percent in February and January, respectively. This component is a leading indicator for the producers' durable equipment component within GDP.
Year-on-year, new orders for durable goods fell to down 2.1 percent in March from up 3.3 percent in February. Year-on-year unfilled orders stood at up 17.6 percent in March - down from up 18.7 percent the month before.
The latest durables report is worrisome at the headline level but component detail suggests that durables are not in a freefall. A weaker dollar clearly is providing lift for some industries. This morning, initial jobless claims were lower than expected and the bond market focused on that, bumping rates up. Equities are likely looking at earnings reports, including disappointing after hours reports yesterday.
Durable goods orders have been pointing to a return of weakness in manufacturing despite a recent uptick in industrial production. Durable goods orders fell 1.1 percent in February, following a 4.4 drop in January. Excluding the transportation component, new orders worsened 2.4 percent in February, following a 0.8 percent decline in January.
New orders for durable goods Consensus Forecast for March 08: +0.6 percent
Range: -1.7 percent to +2.7 percent
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Monthly fluctuations in durable goods orders are frequent and large and skew the underlying trend in the data. In fact, even the yearly change must be viewed carefully because of the volatility in this series. |
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