Fleet Management

Economic Watch: Durable Goods Orders Increase, Key Indicator Down Again

April 24, 2015

By Evan Lockridge

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Orders for big ticket, long lasting durable goods increased 4% in March, the biggest gain in eight months, but a key indicator of business investment fell for the second consecutive month.

New U.S. Commerce Department figures show the hike was due to a 13.5% increase in transportation orders while new orders for the volatile aircraft sector surged 30.6%. The overall performance follows a 1.4% drop in February while the March increase was bigger than most analysts were expecting.

Orders for non-defense capital goods, an indicator of business investment, fell 0.5% in March, following a revised 2.2% drop in February, due in part to a stronger dollar, according to Reuters. Compared to March 2014 the level is 1.8% lower.

Excluding new transportation equipment, overall durable goods orders fell 0.2% while excluding defense equipment new orders increased 2.6%.

Shipments of manufactured durable goods increase in March by 1.1% following two consecutive monthly decreases. It was pushed higher by a 4.3% gain in transportation shipments.

Compared to the same time a year ago, the level of total March durable goods shipments is 3.6% higher while new orders are just 0.1% higher.

Following a ramp up in investment in the second-quarter last year, businesses have pulled back dramatically, according to Sterne Agee Chief Economist Lindsey Piegza.

“As we await first-quarter Gross Domestic Product [report], fixed investment is likely to continue that declining trend, contributing to contract from headline growth. Amid tepid domestic and international demand, coupled with a rising U.S. dollar making American-made goods more expensive and less competitive, business and revenues are being shipped overseas,” she said. “Those hoping for a near-term reversal in the general malaise sweeping across the investment and production sectors of the economy, now that port disruptions and unseasonably cold weather are behind us, were no doubt disappointed by this morning's report.”

Piegza said the continued decline in orders growth suggests fundamental weakness, as opposed to severe weather in the first quarter, is likely to continue to keep business spending tepid as we toward the second quarter of the year.

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