March 2018 Durable Goods Orders

Durable goods orders were strong in March according to the Census Bureau.  March 2018 is the second strong report in a row as well as the fourth increase in five months.  After rising an upwardly revised 3.5 percent (originally 3.1 percent), orders increased a respectable 2.6 percent to end the first quarter.  Year-over-year, these orders for wares expected to last 3 years or longer slowed to 8.6 percent from 9.1 percent in February.   

Civilian aircraft orders skewed the headline tally upwards for a second consecutive period. Nondefense aircraft and parts surged 44.5 percent after climbing 25.5 in February.  Planes and helicopters are expensive, causing these orders to be irregular, so Atlas takes time to look at a portion of the report which excludes them (along with defense spending), leaving a proxy for business confidence.

Nondefense capital goods orders excluding aircraft were unchanged in March.  This disappointing development suggests firms hesitated committing to expensive outlays.  In addition to this stagnation, the year-over-year count decelerated to 6.5 percent from 7.4 percent in February.  Machinery orders were particularly dissatisfying, dropping 1.7 percent.

One month does not make a trend.  For now, Atlas finds comfort in this mantra.  Year-over-year the trend remains strongly positive even after a mild deceleration.  Core orders will continue garnering special attention when the next iteration is released at the end of this month because a healthy U.S. economy needs confident businesses.