US durable goods orders slide, business spending tumbles

New orders for durable goods, items designed to last three years or more, fell across the board in April as US manufacturers cut back on business and consumers refrained from large purchases.

Business investment, officially nondefense capital goods ex-aircraft dropped 0.9% in April and the March total was revised to 0.3% from 1.3%, reported the Commerce Department on Friday.  Analysists had forecast a decline of 0.3%.

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This category is used to approximate business capital spending. Shipments of these so-named core capital goods which are included in the Bureau of Economic Analysis’ calculation of gross domestic product were unchanged in April after falling 0.6% in March. Overall shipments of durable goods dropped 1.6% the most since December 2015. 

Manufacturing expansion in the first quarter had been driven by exports, Chinese purchase of US made goods and inventory stockpiling.

The recent escalation of trade tensions between the world two largest economies and the halt in negotiations will likely keep factory orders from rebounding. The purchasing managers’ index in manufacturing from the Institute for Supply Management dropped to 52.8 in April its lowest reading since before the 2016 election. It has been steadily falling since last August’s high at 61.3.

The initial estimate for US first quarter GDP of 3.2% will be revised on May 30^th. The current median prediction is for a decline to 3.1% but the negative adjustments to durable goods for March could force that number lower.  Second quarter GDP is running at 1.3% annualized, according to the Atlanta Fed GDPNow model.

Overall orders fell 2.1% in April and the prior month’s increase slipped to 1.7% from 2.8%. Expectations had been for a decline of 2.0%.  Goods orders outside of the transportation sector were flat in April and the March 0.4% increase turned into a 0.5% decline after adjustment. 

Orders for transportation equipment declined 5.9% in April after gaining 5.9% in March.

Boeing Company of Chicago reported on its website four new orders in April, down from 44 placed in March.  The company’s largest selling aircraft the 737 Max has been grounded for three months after two fatal crashed in five months.