by Mish

But once again, strength was due to aircraft orders. Core capital goods declined 0.1% vs an expectation of a 0.5% gain.

"Aircraft has been giving a significant boost so far this year to durable goods orders which otherwise are soft. Durable goods orders jumped 1.7 percent in February to beat Econoday’s consensus by 2 tenths. The data include an upward revision to January which now stands at a very strong 2.3 percent. But when excluding transportation equipment, which is where aircraft are tracked, durable orders slow to a 0.4 percent February gain which is well under the 0.8 percent consensus.

The weakest part of the report is perhaps the most important part, that is core capital goods (nondefense ex-aircraft) where orders slipped 0.1 percent in February vs expectations for a 0.5 percent jump and following January’s revised 0.1 percent gain. This points to continued weakness in business investment and eventual trouble for GDP. Yet for the first quarter, core shipments in January and February, which are inputs into GDP, are a net positive, as a 1.0 percent February gain offsets a 0.3 percent January dip. Also unfilled orders for core capital goods are building, up 0.2 percent following gains of 0.5 and 0.4 percent in the two prior months.
Total unfilled orders for durables, however, are unchanged and follow a long string of declines. Inventory growth is modest at 0.2 percent with total shipments up 0.3 percent which keeps the inventory-to-shipments ratio unchanged at a stable 1.61.

Durables activity is improving but the strength has been tied largely to aircraft where sustained month-to-month gains are uncertain. And the strength also does not include new orders for capital goods. The major spikes for advance manufacturing readings have yet to translate to similar gains for government data."

Durable Goods Orders and Shipments

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The above table condensed and highlighted starting from Census.Gov.

Mish Comments

  1. Shipments feed into GDP so the immediate effect of the report should be minimal.
  2. Once again aircraft fueled the report, but aircraft orders have very long lead times and are subject to cancellation.
  3. Motor vehicles and parts (shipments and new orders) are both in the red.
  4. Core capital goods, a measure of future expansion of productive capacity, is flat over the last two months, much weaker than expected.

Alarm Bells

Despite the nice sounding headline numbers, this was actually a weak report when viewing the details.

Autos, which account for about 20% of retail sales are sounding alarm bells.

The regional manufacturing reports have been upbeat. Actual measurements are something else.

Mike “Mish” Shedlock

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Huge surges and declines in aircraft orders have made for extremely volatile durable goods orders lately.

Aircraft Orders: The Only Durable Goods Item Humming

Durable goods orders for March rose 0.7% vs an Econoday consensus of 1.1%. Revisions lifted February gains from1.7% to 2.3%. Once again the good news stops there.

131% Surge in Civilian Aircraft Orders Propels Durable Goods Report: Diving Into the Details

Durable goods orders rose a whopping 6.5% in June led by civilian aircraft orders.

Another Smelly Durable Goods Report

The Census Bureau reports durable goods orders in January rose 1.8% but the good news stops there. December was revised from -0.4% to-0.8%, core capital orders fell 0.4%.

Durable Goods Orders Decline By 1.6%, January Revised Lower

Durable goods orders declined 1.6% in February. January was revised from +0.4% to +0.1%.

Durable Goods Orders Disappoint, Up on Aircraft Orders

Durable goods orders rose 1.3% in November. Excluding transportation, durable goods orders fell 0.1%.

About those Durable Goods Aircraft Orders: Undercurrents of Worry

Aircraft orders have helped pad durable goods new orders for some time. Will those orders translate into actual delivery? When?

Durable Goods Order Jump 4.5%, Almost Entirely on Aircraft

Durable goods orders jumped 4.5% in August. Excluding transportation, durable goods orders increased 0.1%.

Durable Goods Orders Rise 2.6%, Details Weak: Excluding Transportation 0%

The headline durable goods order is exceptional but nearly the entire rise is new aircraft orders.