March's 14.4% Drop in Durable Goods Orders Likely to Worsen Ahead

The waves of unemployment that have hit the country during the COVID-19 pandemic caused an instant recession. While the market already has seen what is only the beginning of bad economic numbers, the U.S. Department of Commerce’s report on durable goods showed just how bleak the manufacturing of big-ticket items was in March.

New orders for durable goods fell by 14.4% ($36.0 billion) to $213.2 billion in March, down from a 1.1% gain to $249.2 billion in February. According to the Commerce Department, this broke what had been a three-month spree of consecutive gains. Excluding defense, orders were down 15.8%.

Consensus estimates varied. Dow Jones (Wall Street Journal) had forecast a 12.0% drop, and Econoday had projected an 11.7% drop on headline durable goods. Transportation equipment already had been running soft, but that was down by 41% ($35.6 billion) to $51.2 billion.

Where this picture looks not as bad is in the durable goods excluding transportation. This reading was down just 0.2% in March, versus a 0.7% decline in February. While Boeing’s plane order weakness is rather well known, March was also the month that car manufacturers closed down the factories and car buying started going south.

The core capital goods reading also was still up by a mere 0.1% in March, which was better than what economists had indicated. One explanation is that there may have been enough orders earlier in March to offset any weakness seen later in the month and into April.

The Commerce Department did indicate that some of the data may be sparse:

Due to recent events surrounding COVID-19, many businesses are operating on a limited capacity or have ceased operations completely. The Census Bureau has monitored response and data quality and determined estimates in this release meet publication standards.

Economists, investors and the public should consider that the April report and other coming reports on durable goods may only continue to worsen. When compared to a year ago, Boeing was still getting orders and the automakers were still selling cars. The drag on the trade war tariffs with China was not enough to compare to current new orders under the COVID-19 recession.