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Industryweek 24877 092717 Durablegoods Spencerplatt

Durable Goods Bookings Advance By Most in 7 Months

April 25, 2019
The improvement in equipment orders signals manufacturers are seeing stable demand, which should contribute to a still-solid pace of economic growth in the first quarter.

Orders placed with U.S. factories for business equipment rose by the most in eight months in March as a broader measure also saw surprising strength, signs corporate investment is regaining its footing despite trade war uncertainty.

A proxy for business investment -- non-military capital goods orders excluding aircraft -- rose 1.3% after the prior month was revised to a gain from a loss, according to Commerce Department figures Thursday that topped all estimates in Bloomberg’s survey. The broader measure of bookings for all durable goods, or items meant to last at least three years, rose 2.7%, the most in seven months and more than projected.

Key Insights

The improvement in equipment orders signals manufacturers are seeing stable demand, which should contribute to a still-solid pace of economic growth in the first quarter. At the same time, companies must contend with larger inventories heading into the second quarter, a factor expected to boost gross domestic product in the short-term but weigh on it later.

The boost in the broader orders gauge was led by demand for both civilian and military aircraft, along with the biggest gain for communications equipment since 2015. Separate data showed Boeing Co.’s aircraft orders rebounded in March. Some figures used to calculate gross domestic product were mixed: Shipments of non-military capital goods excluding aircraft fell 0.2%, missing forecasts for a gain, after an upwardly revised 0.2% rise the prior month.

What Bloomberg’s Economists Say:

“Rising orders are a positive sign for production in the relative near term, but sluggish shipments data suggest this will not occur until the second quarter. Nonetheless, rebounding orders will ease inventory-related production pressures and make way for a resurgence of industrial activity heading into midyear.” -- Carl Riccadonna and Yelena Shulyatyeva, economists

Added Detail

Orders and shipments for primary metals both fell 0.2%. The Commerce Department figures showed the three-month annualized gain for business-equipment shipments was 4.2% while orders rose 2.1% after a decline in February, indicating an upswing of momentum.

Excluding transportation-equipment demand, which is often volatile, durables orders rose 0.4% following two straight declines. Defense capital-goods orders rose 7.4%.

By Katia Dmitrieva

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