The U.S. Census Bureau reported today new orders for manufactured durable goods – items intended to last three years or more, decreased $1.0 billion or 0.5 percent to $214.4 billion in April versus a consensus expected drop of 1.5% after a 0.3 percent decline in March. This was the third decrease in four months.
Excluding transportation, new orders increased 2.5 percent versus the consensus expected decline of 0.5 percent.
Orders for transportation equipment fell 8 percent as demand for civilian aircraft tumbled 24.4 percent. However, with a 2.5 percent order increase once the transportation component gets stripped out, the report shows the fastest growth in nine months since July ’07 with order being up 3.0% y/y.
Additionally, a closely watched proxy for business spending non-defense capital goods orders excluding aircraft rose 4.2 percent, the biggest gain since December. Other strong sectors in the report included electrical equipment/appliances, industrial machinery, and primary metals. Shipments increased $2.5 billion or 1.2 percent to $212.2 billion. Unfilled orders increased $7.6 billion or 1.0 percent to $804.5 billion and are up 16.0% versus last year.
Motor vehicle orders on the other hand were weak, but affected by a strike at a GM parts supplier that has since been resolved.
Today’s data besides suggesting surprising strength in the factory sector, it also supports the perception that the U.S. economy is not in recession and not as weak as has been widely reported. Keep in mind, orders for industrial machinery are up almost 15 percent versus a year ago.
At this point, a 1.5% annualized real GDP growth rate in Q2 fiscal ’08 in our view remains a strong possibility.