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Economy in Brief

U.S. Durable Goods Orders Slump With Aircraft
by Tom Moeller April 23, 2010

Durable goods orders figures can be volatile month-to-month, thus discerning trends can be challenging. The latest figures present that difficulty. March orders slid 1.3% after a revised 1.1% February increase. Consensus expectations had been for a 0.2% uptick. These numbers on the surface give the appearance of a stall in the factory sector's improvement. However, volatility of big-ticket aircraft orders accounts for much of the variation. They slid 42.2% m/m as nondefense aircraft orders plunged by two-thirds (-10.1% y/y).

In addition, a 2.5% increase (5.3% y/y) in March motor vehicle orders made up declines in the prior two months. Excluding the transportation sector altogether, durable goods orders continued to firm after the recent recession. A 2.8% rise last month (13.5% y/y) was the fourth strong gain in five months and the 13.5% y/y surge was the strongest since mid-2006. As a result, further strength in shipments and production of manufactured durable goods is likely.

Improvement in other sectors of durable manufacturing continued last month, and it was broad-based. Primary metals orders increased 3.5% and they're up by one-half from last March. Machinery orders rose 8.6% (22.3% y/y) for the fourth strong gain in five months while electrical equipment orders jumped 4.9% (11.0% y/y). The technology sector also improved. Orders for computers & related equipment jumped 3.4% (6.9% y/y).

Shipments of durable goods followed the gains in orders and they posted a 1.2% increase (4.8% y/y) after two months of slight decline. Shipments of primary metals led the gain with a 4.4% increase (33.7% y/y) along with a 4.3% jump in machinery shipments (2.4% y/y). A 1.9% increase (0.2% y/y) in transportation sector shipments along with a 1.1% rise (2.8% y/y) in electrical equipment. Shipments of computers & electronic products lagged and posted a 2.3% decline (+8.0% y/y), the fourth in five months. Semiconductor shipments were notably weak (10.7% y/y) for the second consecutive month.

A turn away from inventory decumulation is helping the factory sector's improvement. Durable goods inventories rose 0.2% (-7.2% y/y) for the third month of modest increase. Nevertheless, inventories remained well below past levels. Since the December 2008 peak inventories were down 11.1%. Finally, backlogs of durable goods orders slipped 0.3% and remained down 5.2% y/y.

The durable goods figures are available in Haver's USECON database.

NAICS Classification (%) March February January Y/Y 2009 2008 2007
Durable Goods Orders -1.3 1.1 3.8 11.9 -19.8 -6.0 1.4
Excluding Transportation 2.8 1.7 -0.8 13.5 -17.3 -1.4 -0.3
Nondefense Capital Goods -7.5 6.1 3.9 12.7 -23.9 -7.0 3.6
Excluding Aircraft 4.0 2.1 -4.4 12.6 -18.2 -0.5 -2.7
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