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Economy in Brief

New Orders for U.S. Durable Goods Fell
by Tom Moeller May 24, 2006

New orders for durable goods fell 4.8% last month, giving back much of the upwardly revised 6.6% March increase. Nevertheless, durable orders in April remained up 11.3% versus last year and for the first four months of this year orders also were 11.2% ahead of 2005. Consensus expectations had been for a 0.5% April decline.

During the last ten years there has been a 69% correlation between the y/y change in durable goods orders and the change in output of durable goods.

A 32.2% (+99.5% y/y) drop in orders for nondefense aircraft & parts led last month's decline in total orders. In addition, new orders for motor vehicles & parts dropped 1.6% (+2.1% y/y).

Less the transportation sector altogether, durable goods orders fell 1.1% and gave back a piece of the upwardly revised March gain.

Orders for computers & electronic products gave back all of an upwardly revised March gain and fell 10.4% (+10.0% y/y). Machinery orders, however, fell just 0.2% (+12.1% y/y) after a 5.7% April increase that was little revised. Electrical equipment orders rose for the first month in three, up 5.2% (15.7% y/y), while orders for primary metals jumped 3.2% (16.6% y/y).

Orders for nondefense capital goods gave back half of the prior month's surge with a 6.0% drop while orders less aircraft fell 1.7% but remained 9.4% ahead of the year ago level. During the last ten years there has been an 86% correlation between the y/y change in capital goods orders less aircraft and the y/y change in business fixed investment in equipment & software from the GDP accounts.

Shipments of durable goods fell 0.9% (+6.0% y/y) following two months of 0.3% gain. Less the transportation sector shipments fell 0.1% (+8.1% y/y) for the second consecutive month. During the last ten years there has been an 82% correlation between the y/y change in durable goods shipments and the change in industrial production of durable goods.

Order backlogs jumped 1.5% (23.0% y/y), again reflecting a surge in nondefense aircraft & parts (75.1% y/y). Less transportation backlogs were strong again and posted a 1.1% (13.7% y/y) rise. The ratio of backlogs to shipments outside of transportation jumped to the highest level in two years.

Durable inventories increased 0.8% (2.9% y/y). Less transportation inventories also rose 0.8% (3.3% y/y) and the inventory to sales ratio outside of the transportation sector rose for the second month.

NAICS Classification April Mar Y/Y 2005 2004 2003
Durable Goods Orders -4.8% 6.6% 11.3% 9.0% 6.4% -0.6%
    Excluding Transportation -1.1% 3.5% 10.3% 9.4% 7.6% -1.7%
Nondefense Capital Goods -6.0% 11.9% 18.6% 21.4% 5.6% -3.4%
 Excluding Aircraft -1.7% 3.6% 9.4% 12.3% 2.8% -2.0%
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