The Census Bureau reported that durable goods orders fell 4.2 percent in March, reversing February’s 1.9 percent gain. The decrease was led by a steep decline in nondefense aircraft and parts orders, which were down 47.6 percent for the month. These figures are highly volatile, with sales occurring more sporadically than for other sectors.
Others within the transportation sector fared better, with new orders for motor vehicles mostly flat (up 0.1 percent) and a 15.5 percent increase in defense aircraft orders. Excluding the transportation sector, new orders would have fallen just 1.1 percent.
Many of the sectors that have shown strength over the past couple years were down in March. For instance, sectors with the largest declining new orders included machinery (down 2.6 percent), primary metals (down 1.8 percent) and computers and electronic products (down 1.8 percent). In contrast, defense capital goods (up 10.3 percent) and electronic equipment and appliances (up 3.2 percent) showed some strength.
On the positive side, shipments expanded by 1 percent in March. This was led by increased shipping from the machinery (up 6.5 percent), electrical equipment and appliances (up 2.1 percent), transportation equipment (up 1.8 percent, mainly from defense aircraft) and other durable goods sectors (up 1 percent). Core capital goods shipments, which are nondefense excluding aircraft, rose 2.6 percent.
Inventories rose 0.4 percent in March, the 27th consecutive monthly increase. Meanwhile, unfilled orders were essentially unchanged.
Overall, these numbers are mixed. Stronger shipping data – a measure of current activity – are tempered by weaker new orders – a measure of future activity. These figures confirm other measures which indicate that the manufacturing economy has slowed lately, even if just temporarily. Yesterday’s survey from the Richmond Fed is perhaps a sign that April is bringing better news, although this has been uneven as other regions continue showing some stalling of activity.
While industrial production is expected to pick up in the coming months, today’s durable goods release is a sign that this is not assured. For that reason, it will be important for policymakers to adopt pro-growth strategies to get the manufacturing economy operating at its full capacity once again.
Chad Moutray is chief economist, National Association of Manufacturers.