GoldPrice.

Orders for new US durable goods saw the biggest increase in 8 months during March, although a decline in shipments points to decreased spending on equipment during Q1.

Key Takeaways

• New orders for US-made capital goods rose 2.7% in March vs. 0.7% expected - orders for February had declined -1.1%.
• Non-defense capital goods excluding aircraft, a measure used to determine business spending plans, rose 1.3%.
• Business spending on equipment may have slowed during Q1, with shipments declining in March.

Durable goods orders rose unexpectedly, perhaps signaling renewed strength in manufacturing.

An indicator used to determine business plans rose by 1.3%, driven by increased demand for computers and electronic products. March saw the biggest jump in this indicator since last July, with February data revised slightly upward to show these so-called core-capital goods orders rising 0.1% instead of the previously reported dip of -0.1%.

That was the largest increase since last July. Data for February was revised slightly up to show these so-called core capital goods orders edging up 0.1% instead of dipping 0.1% as previously reported.

Core capital goods orders were forecast to rise by another 0.1% in March, making the 1.3% increase particularly significant. Core capital goods shipments, however, slipped -0.2% in March after an upwardly revised 0.2% rise in February. This measure is used to determine business spending on equipment.

Core-capital goods shipments were reported to dip -0.1% in February, with the overall trend pointing to a Q1 slowdown on equipment spending, likely impacted by the major drop in oil prices around the end of 2018.

Overall Positive Data

Overall, the report is relatively encouraging for manufacturing. The increase in core capital goods orders could signal an uptick in the coming months as well as a general stabilization of manufacturing, which has suffered under the disruptive effects of the ongoing trade war and global economic slowdown.

Orders for durable goods, items designed to last more than three years, rose by 2.7% after dropping 1.1% in February. Transportation shot up by 7% after dipping -2.9% the month prior. Motor vehicles and parts saw a 2.1% increase, and the volatile category of non-defense/civilian aircraft rose 31.2% after dropping 25.4% the month before. Boeing reported that it received 44 aircraft orders compared to just 5 the month prior, with the flawed 737 Max aircraft recall likely behind the recent drop in activity. The aircraft failed twice in five months, leading to fatal crashes in each case.

Machinery orders rose 0.3% in March after posting a -0.7% decline in February. Orders for computers and electronics rose 2.2%, and electrical equipment, appliances, and components also saw increases. Fabricated metal products and primary metals saw reduced demand, however.

Gold trading flat at $1279.45, Crude hovering at $65.84, Copper down (1.13)% to $2.87, while the 10-Yr. Treasury is mildly higher to 2.52%. U.S. jobless claims totaled 230,000 vs the 200,000 expected; U.S. durable goods orders rose 2.7% in March, vs the 0.8% increase expected. pic.twitter.com/VmP20wi7Ii

— Jonathan M. Gurney (@jonathan_gurney) April 25, 2019

Expert Outlook

"Business investment indicators perked up in March, with durable goods orders advancing by an above-consensus 2.7%. However, that was flattered by a lofty and unexpected gain in transportation orders," says Katherine Judge, an economist at CIBC Capital Markets. "The 4.2% three-month average annual pace of growth confirms that business investment will be a positive for Q1 GDP and places some upside risk around our below-consensus forecast for tomorrow's release."

Market Reaction

Gold prices have ticked upward following the news with spot gold now trading at $1,281.62/oz, up 0.48% with a high of $1,282.35/oz and a low of $1,273.45/oz. Gold prices are also being influenced by a sudden surge in unemployment claims and rallying crude oil prices, although coming under selling pressure from a strong greenback. Spot gold is still trading near a four-month low at the time of writing.