The durable goods industry experienced quite a good month in March, with both new orders and shipments accelerating. The weakness recorded in January and February will, however, have limited the quarterly increase in business investment. The performance of GDP in Q1 2014 is en route to a very soft reading, in the vicinity of 1%, but the rebound in Q2 seems on track
New orders for durable goods were up 2.6% m/m in March, resulting in an acceleration of the year-on-year rate of growth, from 0.0% to 9.1%. Excluding transportation, March was still a rather good month, with new orders up 2.0% (+1.8% on a 3-month annualised rate, after negative reading in both January and February). Shipments were also well oriented, with a monthly gain of 1.1%, after +1.0% in February.
As for core capital goods (i.e. excluding transportation and defence), which tracks business investment spending, new orders gained 2.2% in March, and shipments 1.0%. For the first quarter as a whole, the performance is rather weak for the latter (+1.7% after 7.8% in Q4 2013), signalling business investment probably slowed. But the news is better going forward, as new orders accelerated from +1.9% to 3.1%, which could announce a rebound in Q2 2014.
GDP growth in Q1 2014 will be released next week, and evidence that it will be weak is mounting. While business investment in equipment and software probably slowed (after growing 10.9% in Q4 2013, quarterly annualised rate), consumer did the same with their consumption expenditures and housing investment. After a strong positive contribution from both the inventory change and next exports, a pay-back is also expected, and all in all, GDP growth could well be just shy of 1%.
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