US: Capital spending remains intact – Wells Fargo
|Data released on Tuesday showed an 0.8% increse in Durable Goods Orders in March, below the 1% of market consensus. Despite a disappointing headline print due to a drop in aircraft bookings, the March durable goods report shows that capital spending remained intact in March with orders rising across all core categories, explained analysts at Wells Fargo.
Key Quotes:
“The fact that orders for durable goods increased just 0.8% in March rather than the 1.0% that had been expected by the consensus is partly a function of weakness in aircraft orders. Civilian aircraft orders were down 9.9% and defense aircraft orders tumbled 25.6%. But transportation as a whole was actually positive for the month thanks to a surge in bookings for motor vehicles.”
“The underlying trend in nondefense capital goods shipments remains strong, up 9% at an annualized rate over the past three months. But after adjusting for the run up in prices, we expect to see a more muted outturn for first quarter equipment spending when first quarter GDP is released on Thursday.”
“Despite all the hand-wringing over rising interest rates and high inflation, an overlooked positive for economic growth is the fact that capital spending remains intact. The rebound in this cycle for core capital goods spending has already handily eclipsed the rebounds that followed the early 2000s tech-wreck and the downturn associated with the financial crisis in 2008 & 2009.”
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