New orders for U.S. durable goods in April easily beat economists’ expectations but the increase mostly reflected a big jump in the volatile civilian aircraft segment. Other manufacturing measures continued to show weakness.
The Commerce Department on Thursday said orders for items meant to last three years or more jumped 3.4% last month after an upwardly revised 1.9% increase in March. Economists surveyed by The Wall Street Journal had expected overall orders to increase only 0.7%.
A 64.9% gain in civilian-aircraft orders fueled the April increase. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.8% after an upwardly revised 0.1% drop the prior month.
“Capital-goods orders and shipments remain unusually weak, indicating that equipment investment is still struggling in the second quarter,” Capital Economics economist Paul Ashworth told the WSJ.
Core capital-goods orders have now declined for three consecutive months. Economists polled by Reuters had forecast a 0.4% increase in April.
“Companies have been reluctant to invest more heavily because of a tepid global economy and falling exports, among other things,” MarketWatch said, noting that core capital-goods orders are 4.1% lower through the first four months of the year compared to the same period in 2015.
On Tuesday, the Equipment Leasing and Finance Association reported a 12% year-on-year drop in business equipment lending and financings.
Overall, durable-goods orders are up 0.8% so far this year, supported by demand for planes and military equipment. March durable-goods orders were revised up to a 1.9% increase from a previously estimated 0.8% gain.
U.S. News & World Report said the core orders trend “doesn’t bode particularly well” for the updated first quarter GDP data scheduled to be published on Friday. The continued weakness in manufacturing could also play into the Federal Reserve’s consideration of another interest rate hike.
“The Fed is searching for signs that the U.S. economy is accelerating and overseas turmoil has stabilized ahead of a June policy meeting,” the WSJ said. “The latest data could be viewed as a mixed bag,” with the capital-investment figures suggesting businesses are not “anticipating a significant pick up in economic growth later this year.”