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Durable Goods Orders in March Weaker Than Expected, Signal Soft U.S. Economy

The Department of Commerce reported Wednesday morning that orders for durable goods fell more than economists expected last month, largely because of the volatile aircraft segment, but weakness
Andrew Klips became enraptured with the markets as a teenager and has been an active trader on a daily basis for more than a decade. Specializing in technical analysis, he is an avid player of stock charts making technical bottoms mixed with a particular affinity for the fundamentals of biotechnology companies.
Andrew Klips became enraptured with the markets as a teenager and has been an active trader on a daily basis for more than a decade. Specializing in technical analysis, he is an avid player of stock charts making technical bottoms mixed with a particular affinity for the fundamentals of biotechnology companies.

The Department of Commerce reported Wednesday morning that orders for durable goods fell more than economists expected last month, largely because of the volatile aircraft segment, but weakness was shown in most other categories as well.

Orders for durable goods, or items that are meant to last more than three years, dropped 5.7 percent in March to $216.3 billion, representing the largest one-month drop since last August. In February, durable goods orders had increased by a revised 4.3 percent (down from an original 5.6 percent increase), following a 4.9 percent drop in January as the transportation segment continued on a roller-coaster-type path.

Economists had been expecting a decline in March, but only about 3.0 percent.

The commercial airline business is known to see-saw back and forth with new bookings. In March, orders tumbled 48.2 percent. Orders for defense aircraft and parts slid by 11.4 percent. Those declines, leading to a 15.0 percent overall decline in the transportation segment, where partially offset by increases of 0.2 percent in new orders for motor vehicles and auto parts.

New orders in every other main category declined, except for computers and electronics products, which recorded a 1.0 percent gain for the month.

Excluding transportation, new orders were down by 1.4 percent in March after a 1.7 percent drop in February. Excluding the defense category, new orders were lower by 4.7 percent.

Shipments of manufactured durable goods rose by $1.0 billion, or 0.4 percent, to $230 billion. Shipments have increased in six of the past seven months, with the March level marking the highest amount of shipments since the series began being published on a NAICS (North American Industry Classification System) basis in 1992. Transportation equipment led the gainers with a 2.1 percent increase to $67.6 billion.

Inventories also reached record highs in March with a 0.1 percent increase to $377.2 billion. Inventories of durable goods have climbed in 17 of the past 18 months.

Nondefense new orders for capital goods, or those items used to build other items, fell by 10.6 percent to $70.2 billion in March. Orders for “core” capital goods, a metric for measuring private-sector business investment, inched ahead by 0.2 percent in March, following a 4.8 percent contraction the month prior.

The markets are taking the dour report in stride and lie in wait of the important first reading of gross domestic product for the January to March period that will be coming on Friday. Economists are expecting the report to show that the U.S. economy expanded by 3.0 percent during the first quarter.

Shortly into Wednesday’s trading session, the Dow Jones is down by 8 points, the broader S&P 500 is up by 2 points and the Nasdaq is ahead by 4 points.