New orders for long-lasting manufactured durable goods jumped more than expected in March, but analysts pointed to some concerns deeper in the Commerce Department report. Separate reports showed improvements in new homes sales as well as in consumer confidence.
The 2.6% increase in new durable goods orders from the month before was mainly due to double-digit percentage gains in orders for civilian and defense aircraft, which pushed the volatile transportation category higher by 7.6%.
Shipments of durable goods also improved 0.3% in March, also propelled by an increase in transportation shipments. Overall shipments are up 10 of the last 11 months.
What’s troubling, according to analysts at Wells Fargo Securities, is that if you take out transportation, overall orders were unchanged in March – and machinery orders fell 1.7%, the second drop in the last three months.
An increase in March overall new orders seen in the Institute for Supply Management’s monthly survey, issued earlier this month, are not reflected in this report from the Commerce Department.
BMO Financial Group noted core capital goods orders, those excluding aircraft and defense and an indicator of business investment, also declined for the third time in four months, and were down modestly in the quarter. BMO said this could foreshadow some flagging in business spending.
New Home Sales Level Second Best Since Great Recession
A separate Commerce Department report showed sales of newly built, single-family homes rose 4% in March to a seasonally adjusted annual rate of 694,000 units, following an upwardly revised February report.
The adjusted annual rate is the second highest reading since the Great Recession and 8.8% above the March 2017 estimate.
“The March new home sales report is consistent with our solid builder confidence readings over the past several months,” said National Association of Home Builders Chairman Randy Noel. “As consumer confidence grows and more prospective buyers enter the housing market, the sales numbers should continue to make gains.”
Regionally, new home sales rose 28.3% in the West and 0.8% in the South. Sales decreased 2.4% in the Midwest and 54.8% in the Northeast.
“We saw sales move forward in the West and the South regions, which is in line with recent evidence of faster growth in population, employment and single-family construction in these areas,” said NAHB Senior Economist Michael Neal. “But with nationwide economic growth and favorable demographics, we can expect continued strengthening of the housing market across the country.”
Consumer Confidence Turns Around For The Better
Another report showed consumer confidence rebounded this month after declining in March.
The private research group The Conference Board reported its Consumer Confidence Index now stands at 128.7, following a reading of 127 the month before.
The Present Situation Index increased from 158.1 to 159.6, while the Expectations Index improved from 106.2 last month to 108.1 this month.
“Consumers’ assessment of current conditions improved somewhat, with consumers rating both business and labor market conditions quite favorably,” said Lynn Franco, director of economic indicators at The Conference Board.
She said consumers’ short-term expectations also improved, with the percent of consumers expecting their incomes to decline over the coming months reaching its lowest level since December 2000.
“Overall, confidence levels remain strong and suggest that the economy will continue expanding at a solid pace in the months ahead,” Franco said.