The Economy

Durable Goods Orders Increase 0.7% in March

But a gain of only 0.2% in core capital goods orders suggests momentum in manufacturing has eased after recent strong growth.
Matthew HellerApril 28, 2017
Durable Goods Orders Increase 0.7% in March

Orders for durable goods manufactured by U.S. companies rose for a third straight month in March but the gain was lower than economists expected and a category that reflects business investment plans remained weak.

The Commerce Department said orders rose 0.7% last month, the weakest showing since a 0.9% drop in December. Economists polled by MarketWatch had expected a 1.4% advance.

The March gain in orders was fueled by the volatile categories of commercial aircraft (up 7%) and military aircraft (26%), which offset a second straight month of declining demand for motor vehicles. Excluding the transportation industry, orders for durable goods fell 0.2%, the first decline in five months.

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The closely-watched category of non-defense capital goods orders rose a slight 0.2%, the third straight month that the proxy for business investment has shown weakness though February core capital goods orders were revised upward to a 0.1% gain after a previously reported 0.1% decline.

Economists polled by Reuters had forecast core capital goods orders rising 0.5% last month.

“Businesses have been slowly increasing investment since last fall after a two-year slump, a good sign for the U.S. economy,” MarketWatch said. “Stronger profits and rising customer demand have helped, but companies are also optimistic that a pro-business Trump administration will make the climate for investment even more attractive.”

But Reuters said the modest increase in core capital goods orders for March suggests a moderation in manufacturing sector activity after recent strong growth.

Andrew Hunter, an economist at Capital Economics, said that while the durable goods report was weaker than expected, he still believed the conditions were favorable for a rebound in manufacturing in coming months, which should support improved overall growth.

“With measures of both business and consumer sentiment still at a high level, we expect GDP growth to pick up over the coming months,” he said in a note to clients.

Shipments of core capital goods climbed 0.4% in March following a strong 1.1% gain in February.

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