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Economy in Brief

U.S. Durable Goods Orders Dipped Unexpectedly
by Tom Moeller April 24, 2008

During March, new orders for durable manufactured goods dipped 0.3% after falling 0.9% in February, a decline which was less than the 1.7% drop reported initially. Consensus expectations had been for a slight 0.1% uptick in March orders and it was the third consecutive m/m decline.

Outsized weakness was registered in the transportation sector where new orders fell 4.6%. Excluding the volatile transportation sector durable goods orders rose 1.5%, double the expected gain. A 2.1% February decline in orders was little revised.

The 4.6% decline in transportation equipment orders was led by a 4.6% (-14.7% y/y) downdraft in orders for motor vehicles & parts. That was partially offset by a 10.7% gain in new orders for aircraft & parts. Orders for nondefense aircraft & parts rose 5.5% (-18.9% y/y), about the same as they did in February.

Orders for nondefense capital goods rose 1.5% after a revised 0.3% dip during February. During the last ten years there has been an 80% correlation between the y/y gain in nondefense capital goods orders and the rise in equipment & software spending in the GDP accounts. The correlation with capital goods shipments is, as one would expect, a larger 92%.

March new orders for nondefense capital goods less aircraft were unchanged, following a little revised 2.0% February decline which was double the 1.0% drop during January.

Orders for machinery rose 6.2% (1.9% y/y) and recovered about half of the February decline.Computers & related products orders rose 1.6% on the heels of February's 11.3% surge while new orders for communications equipment dipped 0.3%. More extreme weakness in these orders is indicated by the sharp 19.2% decline from their peak level last July. Primary metal orders ticked up 0.2% (6.3% y/y).

Overall shipments of durable goods dipped 0.4% (+0.4% y/y) as shipments from the transportation sector fell 1.9% (-5.3% Y/Y). Less transportation, shipments ticked up 0.2% (2.5% y/y).

Inventories of durable goods backed up by 1.1% (5.1% y/y). The three month gain in durable goods inventories remained about steady with the prior several months at 8.6% (AR). That is, however, sharply elevated from the -0.1% rate of decumulation last August. Less transportation, inventories also rose at an accelerated 4.9% rate during the last three months.

Maintaining Stability in a Changing Financial System: Some Lessons Relearned Again? From the Federal Reserve Bank of Kansas City can be found here.

NAICS Classification March February Y/Y 2007 2006 2005
Durable Goods Orders -0.3% -0.9% -2.1% 0.9% 6.3% 9.9%
    Excluding Transportation 1.5% -2.1% 2.2% 0.2% 7.6% 8.8%
Nondefense Capital Goods 1.5% -0.3% -3.3% 3.5% 10.6% 17.1%
 Excluding Aircraft 0.0% -2.0% 1.7% -1.6% 8.5% 11.1%
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