April 2018 Durable Goods Orders

Orders for wares expected to last three years or longer declined 1.7 percent in April 2018 according to the Census Bureau.  However, the headline tally for Durable Goods Orders (DGO) can be ignored this time around.  A comparative decline in aircraft orders from the previous period pushed the total lower.  Of course, aircraft are expensive, so they skew the totals during and after the months in which they are ordered.  Despite the dour print, the internals looked very favorable.

Various subsets of this indicator were accompanied by positive signs for the month.  Orders for primary metals rose 4.6 percent.  Computers and related equipment climbed 5.3 percent.  Requisitions for communications equipment increased 1.6 percent.  Electrical equipment, appliances, and components rose 2.4 percent.  As you can see, the headline did not tell the full story, and Atlas’ favorite portion of this release was higher also. 

What floats our boat is seeing core-DGO managing an increase of 1.0 percent.  This category measures capital goods orders from companies by subtracting defense and aircraft orders and serves as a proxy for business confidence.  It’s continued positive trend (up 5.7 percent year-over-year) demonstrates firms are willing to make expensive (and therefore risky) outlays because they believe it will provide an adequate return on their investment.  Additionally, durable goods shipments rose 0.8 percent in April, boding well for second-quarter gross domestic product (GDP).

America’s economy continues to produce positive signs.  Yes, we can point out negatives, but evidence skews favorably for additional growth.  Our current expansion will not last forever, so let’s enjoy it while we can.