Economy

Will Durable Goods Alter GDP Expectations?

Jon C. Ogg

Published: March 23, 2016 11:35 am

Last Updated: January 13, 2020 11:36 am

Thursday is likely to make a splash on the economic front. Economists and investors alike are trying to see just how good, or how weak, the gross domestic product (GDP) will be for the first quarter of 2016. Durable goods can be a report that impacts GDP forecasts, if the report is far enough above or below the estimate. It also turns out that the durable goods report is one of the most volatile economic readings of them all and subject to huge hits and misses above or below the consensus estimates.

Durable goods will be released on Thursday morning ahead of the three-day weekend. It will be a February report.

There are a wide variety of estimates. Reuters has consensus estimates pegged at -2.9% for the headline durable goods and -0.2% on the ex-transportation side of the durable goods report. Bloomberg has the February readings pegged at -3.0% for the headline and -0.2% excluding transportation.

One thing that may have helped out here is a bump up in the manufacturing activity in March regional readings. Whether this goes back into July remains up for grabs.

Another issue will be the reading on the core capital goods. This is actually less volatile.

Note that Boeing has had weak plane orders at the start of 2016. This is on the transportation side. Caterpillar, on the capital goods side, has also warned for sales and earnings in 2016. Oil giants have all trimmed capital spending plans for 2016 as well, which already has been showing up against many of the durable goods sectors over the past six months or so.

Thursday’s report on durable goods will be among the last of the major reports before the Easter weekend. With many people heading out for a holiday, that means that most investors will expect market participation going into and after the report to be more muted versus normal durable goods reports.

Again, the volatility of the numbers and the odds that economists are often wrong is what potentially will make for changes to first-quarter GDP estimates.