Durable goods orders increased in March.

Given the pace at which new orders decelerated in 1Q23 compared to 1Q22, it should not have been as difficult for 1Q24 order growth to accelerate. Instead, the average y/y growth rate for headline durable goods orders decelerated in the first quarter and will face a tougher comparison in the second quarter. Thus, we will continue to monitor this series and other manufacturing data closely for a view into demand and what it could be mean for the path of the broader economy.

Looking at the monthly data, durable goods orders accelerated by 2.7% m/m in March to $283.4 billion, lifting the drawdown from their all-time high of $301.3 billion made last June to -5.9% compared to -8.3% in the previous month. On a y/y basis, however, the headline growth rate slowed to 1.3% from 2.0% last month, as it moved against a tougher comparison that gets tougher through June.

Source: Macrobond. 

It is worth noting that some of the m/m increase in headline order growth could partly be due to the large Boeing order for the month of March, which came in at 113, up from 15.

Source: Macrobond. 

To remove some of the volatility that lumpy aircraft orders can cause when reviewing trends in new order growth, we tend to look at new orders excluding transportation and nondefense capital goods orders excluding aircraft, commonly referred to as ‘core orders’. New orders, excluding transportation, accelerated by 0.3% m/m to a y/y rate of 1.0%, unchanged from the prior month’s y/y rate. Core orders increased by 0.2% m/m in March, a slower rate than the 0.4% print in February. On a y/y basis, core orders accelerated by 75 basis points to 1.1%.

Source: Macrobond. 

Looking at the average y/y growth rates by quarter, we see that headline order growth decelerated on a rate of change basis against an easy comparison to 0.6%, its slowest growth rate since 3Q20. Durable goods orders excluding transportation decelerated to 1.0% y/y from 1.5%. On a core basis, Q1 decelerated to 0.4% y/y, its slowest growth rate since 3Q20. The headline series will move against a tougher comparison in Q2, while excluding transportation orders and core orders will move against an easier comparison.

Source: Macrobond. 

While this data can be noisy, we are paying attention to whether the data does, or does not, accelerate against an easy comparison setup. If it does not, it would likely be an indication of weaker demand setup and could have an impact in other areas of the economy.

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.