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Economy in Brief

U.S. April Durable Goods Orders Off Less Than Expected; Rose Excl Transportation
by Tom Moeller May 28, 2008

April new orders for durable manufactured goods dipped 0.5% after slipping a little revised 0.3% during March. Consensus expectations had been for a 1.1% decline in April.

Outsized weakness in orders for transportation equipment accounts for much of this year's weakness in new orders. Overall, orders in the transportation sector this year are down 18.7% led by a 34.1% drop in orders for nondefense aircraft. Orders for motor vehicles & parts also are down 10.6% YTD. Less the transportation sector altogether, durable goods orders actually rose 2.5% last month and have risen 2.1% so far this year.

Orders for nondefense capital goods fell 1.4% during April and that completely offset a 1.4% March gain. Here again, however, the latest decline stems from the transportation sector. Less aircraft, nondefense capital goods orders rose 4.2% in April and that recovered declines during the prior three months. Since yearend these orders have risen 1.4%. 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%.

Orders for machinery were strong last month and rose 4.2% (14.5% y/y). Year-to-date machinery orders rose 2.5% after last year's 0.6% uptick.Orders for computers & related products, however, slipped 1.5% and are down 0.5% so far this year. New orders for communications equipment rose 2.2% last month but likewise are down 2.1% in 2008. Also, to the upside were April primary metal orders. They surged 2.8% and are up 6.8% this year.

Overall shipments of durable goods surged 1.2% last month and less the transportation sector shipments also rose a firm 1.3%. Less transportation shipments have risen 1.9% this year after last year's 0.3% uptick.

Inventories of durable goods rose 0.5% during April and year-to-date inventories have increased 2.4% following last year's 3.5% rise. Less transportation, inventories rose 0.4% last month and by 1.7% this year, about the same as during all of 2007.

Has Inventory Volatility Returned? A Look at the Current Cycle from the Federal Reserve Bank of New York can be found here.

NAICS Classification April March Y/Y 2007 2006 2005
Durable Goods Orders -0.5% -0.3% -3.4% 1.4% 6.2% 10.2%
    Excluding Transportation 2.5% 1.7% 3.0% -0.3% 9.1% 9.1%
Nondefense Capital Goods -1.4% 1.4% -4.8% 3.5% 9.4% 17.3%
 Excluding Aircraft 4.2% -1.0% 2.4% -2.7% 10.7% 11.6%
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