The report on durable goods for the month of March is turning out to not be too durable. This is a highly volatile reading because it involves so many big ticket items from airlines to cars to computers and refrigerators. Overall, the report came to -5.7%, versus consensus readings of only -2.8% from Bloomberg and -2.9% from Dow Jones. On a seasonally adjusted basis, this comes to $216.28 billion. On an ex-transportation basis, the report came to -1.4%, versus expectations of positive 0.5% from Bloomberg.
To add insult to injury, the prior month’s revisions were worse than originally reported. The new orders overall was revised to a gain of 4.3% from a prior 5.7% reported, and the ex-transportation revision went down to -1.7% from a prior report of -0.5%.
We would caution that this is generally a very volatile number and can be negative even during a boom, or vice versa, based on simply a few large ticker trends. Still, this is just one more negative reading from the Commerce Department showing that growth is either negligible or in contraction.
Nondefense capital goods, excluding aircraft, managed to show a gain of 0.2%, and that may keep this report from coming over like a train wreck. Computers, electronics,and auto-related spending rose while metals, machinery and aircraft were down.
One thing to consider is that this report likely will act as a drag against the preliminary first-quarter gross domestic product (GDP) report due on Friday. That is also from the Commerce Department. We currently show that Bloomberg is calling for 3.1% in real GDP growth (with a range of 2.3% to 3.43%) and is calling for 1.4% with the price index taken into account. Dow Jones is calling for a gain of 3.2% in GDP and 1.3% with the price index.
With a weaker-than-expected March and a lower revision to February, it seems fairly obvious that the economists will knock off one-tenth or two-tenths from their GDP estimates to reflect the durable goods orders.