Was Durable Goods Report Strong Enough to Boost GDP?

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If there is one economic report that can be very volatile and can come in well above or well below expectations, it is the monthly durable goods report. This extreme volatility is also true regardless of whether the economy is growing fast or is stagnating due to the number of moving parts.

New orders for durable goods rose 2.6% in March. This handily beat the Bloomberg consensus estimate of a 1.7% gain. And February’s new orders of durable goods reading was revised to a 3.5% gain from a preliminary 3.1% gain.

The big question is whether the report was enough to influence the expectations for the gross domestic product (GDP) in the first quarter. While the gain was much higher than expected, there is not the same strength equally in all facets of the durable goods economy. In fact, excluding transport, new orders are flat, and the core capital goods market dipped back into the red.

The 0.0% ex-transportation reading in durable goods in March was under the 0.5% consensus gain expected by Bloomberg. And the February reading was revised to a gain of 0.9%, rather than the 1.2% gain that had originally been reported.

The core capital goods, which measures how businesses are investing back into their own operations for future years, was down by 0.1% in March. Bloomberg was calling for a 0.6% gain. And February’s gain of 1.8% originally reported was cut in half to a 0.9% gain in the revision.

As far as whether the overall transportation figures are helping out enough for GDP, the preliminary first look at GDP for the first quarter of 2018 is due on Friday morning. Bloomberg is calling for GDP to rise 2.0%, with the GDP Price Index coming in at 2.4%. Real consumer spending is expected to have risen by 1.1% in the first quarter of 2018.

Dow Jones is calling for first-quarter GDP to be up only 1.8%, and with a chain-weighted price index gain of 2.2%.

As a reminder, the first-quarter view on GDP tends to be quite volatile and has tended to have seasonal issues that tend to drive the report lower rather than higher.

Stay tuned.