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Factory Orders: Positive Revisions, Trend Still Positive

May 4, 2017

Bottom Line: Factory orders increased slightly in March, below expectations but mostly offset by a modest positive revisions to February. This March data confirms the modest contribution from equipment spending seen in the 1st Quarter GDP report. Overall the trends are still positive for factory orders with the last six months growing at a 9.5% annualized pace, faster than the 2016 pace of 3.6% and sharply better than the contraction seen in 2015. That said, the "core" components of this report grew at a modestly slower pace in the last three months than they had in the prior six- and 12-months. While not a shift in trend, this bears watching.

Factory Orders ROSE by 0.2% in March, compared with market expectations for an increase of 0.4%. The prior month's gain was revised higher from 1.0% to 1.2%. Durable goods orders climbed by 0.9%, as previously reported, while nondurable goods orders slipped by 0.5%.

Excluding orders for defense goods, civilian aircraft and petroleum products, (so called) core factory orders were nearly unchanged. Factory orders are now 5.8% ABOVE their year ago level but the year-over-year growth rate has rose moderately over the past year (from -4.3% a year ago to the current 5.8%).

The Q1 average for nondefense capital goods shipments is modestly above its Q4 level, in-line with the slight increase in equipment spending that was reported in the advance Q1 GDP report.

Article by Contingent Macro Advisors