Strong Aircraft Sales Pushed New Durable Goods Orders Sharply Higher in April

The Census Bureau said that new durable goods orders increased 3.4 percent in April, extending the 1.9 percent gain seen in March. Sales of new durable goods orders rose from $228.3 billion in March to $235.9 billion in April. Demand have risen in three of the four months so far in 2016, providing some encouragement for a sector that has experienced its share of softness over the past year. On a year-over-year basis, sales have risen from $231.5 billion in April 2015, an increase of 1.9 percent. Yet, much of that gain came from transportation equipment, particularly aircraft sales. Excluding transportation, new orders for durable goods increased by just 0.4 percent, and over the past 12 months, that figure was down 1.4 percent. This suggests that demand remains somewhat weaker than the headline number would seem to indicate – a sign that durable goods manufacturers continue to be challenged beyond automobiles and aircraft.

Looking more closely at the April new orders data, the sector-by-sector analysis was somewhat mixed. On the positive side, there were increased sales for nondefense aircraft and parts (up 64.9 percent), fabricated metal products (up 3.1 percent), motor vehicles and parts (up 2.9 percent), computers and electronic products (up 1.9 percent) and electrical equipment and appliances (up 0.5 percent). In contrast, there were declining orders for defense aircraft and parts (down 4.5 percent), machinery (down 1.9 percent) and other durable goods (down 0.6 percent), with flat sales for primary metals. New orders for core capital goods (or nondefense capital goods excluding aircraft) declined by 0.8 percent in April.

Meanwhile, durable goods shipments increased by 0.6 percent in April, rebounding from two months of decreases. The strongest shipments growth for the month occurred in the motor vehicles and parts (up 3.3 percent), nondefense aircraft and parts (up 2.8 percent), fabricated metal products (up 1.5 percent), electrical equipment and appliances (up 1.4 percent) and primary metals (up 0.6 percent) sectors. These increases were somewhat offset by declines for defense aircraft and parts (down 21.4 percent), other durable goods (down 0.6 percent), machinery (down 0.5 percent) and computers and electronic products (down 0.1 percent). Excluding transportation, durable goods shipments increased by 0.4 percent, with core capital goods shipments up 0.3 percent.

The year-over-year data were similar to the new orders analysis discussed above, with each highlighting ongoing weaknesses in the sector. Since April 2015, durable goods shipments have fallen 1.2 percent, with a decline of 1.9 percent when transportation equipment were excluded.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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