Durable Goods: Sharp Rebound Ahead of Tariffs

Bottom Line: With tariffs looming orders for primary and fabricated metals led the sharp increase in Durable goods orders in February as some businesses may have expedited purchases of products expected to see tariffs. The January and February average of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q4 level, suggesting that capital spending will have a positive Q1 impact on GDP growth. Looking at the past 12 months, hardgood orders have increased at a 8.9% annualized rate, a solid, steady pace of gains that may see volatility as markets adjust to tariffs in the coming quarters. Durable Goods Orders ROSE by 3.1% in February, compared with market expectations for an increase of 1.6%. Moreover, the prior month was revised higher from -3.7%to -3.5%. Transportation Orders ROSE by 7.1% with civilian aircraft orders climbing by 25.5% while motor vehicle orders climbed by 1.6%. Ex-transportation orders ROSE by 1.2%. Core Durable Goods Orders, those excluding both civilian aircraft and defense, ROSE by 1.40% and are 7.4% ABOVE their year ago level. Nondefense Capital Goods Shipments ROSE. Including civilian aircraft, they ROSE by 1.2% and excluding them they were UNCHANGED. Durable manufacturing inventories ROSE by 0.4%. The January and February average of nondefense capital goods shipments ex-aircraft, proxies for equipment and software investment, is modestly above its Q4 level, suggesting that capital spending will have a positive Q1 impact on GDP growth.