Durable goods orders drop 4.2% in March
posted at 10:01 am on April 25, 2012 by Ed Morrissey
We’re just a couple of days away from the Commerce Department Q1 GDP report, and the indicators continue to turn sour. Today’s bad news comes from the manufacturing sector, where durable-goods orders had their worst month in three years:
New orders for manufactured durable goods in March decreased $8.8 billion or 4.2 percent to $202.6 billion, the U.S. Census Bureau announced today. This decrease, down two of the last three months, followed a 1.9 percent February increase. Excluding transportation, new orders decreased 1.1 percent. Excluding defense, new orders decreased 4.6 percent. Transportation equipment, also down two of the last three months, had the largest decrease, $7.1 billion or 12.5 percent to $49.7 billion. This was due to nondefense aircraft and parts, which decreased $7.7 billion.
And in even worse news, inventories continued to rise even though demand fell significantly:
Inventories of manufactured durable goods in March, up twenty-seven consecutive months, increased $1.7 billion or 0.4 percent to $375.1 billion. This was at the highest level since the series was first published on a NAICS basis and followed a 0.3 percent February increase. Transportation equipment, also up twenty-seven consecutive months, had the largest increase, $0.8 billion or 0.7 percent to $118.0 billion. This was also at the highest level since the series was first published on a NAICS basis.
The dropoff in transportation orders was expected, although perhaps not to this extent; that sector dropped more than 12%. However, durable orders fell in non-transportation categories as well, which was not expected. February’s previously-announced increase was revised downward as well:
Demand for long-lasting U.S. manufactured goods dropped by the most in three years in March and a gauge of business spending plans fell, suggesting factory activity lost momentum as the first quarter ended.
Durable goods orders tumbled 4.2 percent, the largest decline since January 2009, the Commerce Department said on Wednesday after a downwardly revised 1.9 percent increase in February.
Economists had forecast orders for durable goods, which range from toasters to aircraft, falling 1.7 percent after a previously reported 2.4 percent rise in February.
Orders were dragged down by a 12.5 percent plunge in bookings for transportation equipment — the most since November 2010.
Excluding transportation, orders fell 1.1 percent after a 1.9 percent rise in February. Economists had forecast this category rising 0.5 percent.
The 2011Q4 GDP report came in at a respectable but hardly potent 3.0% after a decent run in the manufacturing sector and some stability in gas prices. However, in 2012Q1, we have had two very bad months (January and March) for durable goods, a bad January for overall factory orders which will likely get repeated in March, and a hiring slowdown that’s hardly coincidental. Don’t be surprised to see something significantly bad for a GDP report in a couple of days.