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Durable Goods: Decline Less Than Expected

May 26, 2017

Bottom Line: Durable goods orders fell less than expected in April but were revised sharply higher for March due to capital goods orders in the defense sector. As seen in the 2nd estimate of GDP this morning, this suggests business fixed investment ended the 1st quarter on a a much stronger note than previously reported. Still, the trend growth rate remains tepid with total new orders contracting 2.2% annualized and the last twelve months growing at just 0.9%.

Durable Goods Orders FELL by 0.7% in April, compared with market expectations for a decline of 1.5%. Moreover, the prior month was revised higher from 0.7%to 2.3%.

Transportation Orders FELL by 1.2% with civilian aircraft orders dropping by 9.2% while motor vehicle orders climbed by 0.3%. Ex-transportation orders FELL by 0.4%.

Core Durable Goods Orders, those excluding both civilian aircraft and defense, FELL by 0.3% and are 3.6% ABOVE their year ago level.

Nondefense Capital Goods Shipments FELL. Including civilian aircraft, they FELL by 0.5% and excluding them they FELL by 0.1%

Durable manufacturing inventories ROSE by 0.1%.

The April level of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q1 level, suggesting that capital spending will have a positive Q2 impact on GDP growth.

Article by Contingent Macro Advisors