24/7 Wall St.

The first quarter of 2017 was marked with strong consumer confidence, solid spending and even better than expected corporate earnings. That did not translate into a very strong durable goods report for the month of March. Thursday’s economic report from the U.S. Department of Commerce showed that the headline for durable goods rose just 0.7% to $238.7 billion in March.

Bloomberg had a consensus estimate of 1.1% for the headline report. One issue that might have eaten into the gain was that February’s headline gain of 1.7% was revised up to 2.3%. Suddenly the report’s weakness might be a wash.

The total new orders on a year-over-year basis were up 5.8%, and the February gain was revised lower to 4.5% from 5.0% initially reported.

Where things look worse is on transportation is excluded. The monthly reading was a drop of 0.2%, lower than the 0.4% gain expected by Bloomberg, while February’s reading was revised to a gain of 0.7% from a preliminary gain of 0.4%. Excluding transportation, new orders were up 4.6% from a year ago, and the February revision went up to 5.1% from 4.6%.

Transportation equipment has now seen three months of gains, and the $2.0 billion gain was up 2.4% to $83.3 billion.

Economists try to look for a core reading in most economic numbers, which is important because durable goods can be skewed by a big change in car buying or by just a few airline orders. The core capital goods within durable goods rose by 0.2% in March, but that was shy of the 0.4% expected by Bloomberg. But the February monthly reading was revised to a gain of 0.1% rather than a drop of 0.1%. That core capital goods reading was up 3% from a year ago within durable goods.

While the headline numbers look weak, they need to be kept in context, with revisions mostly being higher. Another issue to consider is that the increase in durable goods is actually now a gain for three consecutive months.

The Commerce Department’s reading on inventories matters because this is what can alter the following month’s readings. It said:

Inventories of manufactured durable goods in March, up four of the last five months, increased $0.5 billion or 0.1 percent to $385.7 billion. This followed a 0.2 percent February increase. Machinery, also up four of the last five months, led the increase, $0.4 billion or 0.6 percent to $66.7 billion.