EmailDurable orders fell 3.6% in April after increasing an upwardly revised 4.4% (from 4.1%) in March. This was the biggest decline since October 2010. The Briefing.com consensus expected durable goods orders to decline 2.0%.
On the surface, the large decline in orders is disheartening, especially considering that every sector with the exception of computers and electronic products fell on a month-to-month basis. Yet, the drop in demand followed a banner month in March and, typically, orders decline the next month month after rising by at least 3.0% in the prior month. This suggests that the April decline is not the start of a new downward trend, but the result of too much growth in the prior month.
We expect orders to rebound in May as demand returns to a less volatile path.
The transportation sector, as expected, was the biggest loser.
Orders at Boeing fell from 100 planes in March to only two in April. Using the Boeing price guide, we estimate total orders declined by roughly 94% in dollar terms. While some of the drop was attributed to seasonality, the bulk of the loss flowed through to the durable orders data and lowered nondefense aircraft orders by 30.0%.
Furthermore, automobile production slowed considerably due to parts shortages from Japan. Knowing that manufacturers would not be able to fulfill new orders, dealers seem to have cut back on orders to prevent a large backlog. This caused motor vehicle and parts orders to decline 4.5%.
Excluding transportation, durable orders declined 1.5% in April after increasing an upwardly revised 2.5% (from 2.3%) in March. The consensus expected these orders to increase 0.6%.
Orders of nondefense capital goods excluding aircraft fell 2.6% in April after increasing 5.4% in March. Shipments, which are accounted in second quarter GDP, declined 1.7%.
