U.S. business equipment orders edged up in March, suggesting that businesses are cautious about the demand outlook and dampening investment.
On Wednesday, April 24, the U.S. Department of Commerce released data showing that U.S. durable goods orders in March increased by 2.6% month-on-month, better than market expectations, and rebounded sharply from the previous value, which was further revised down to 0.7% from 1.3%, which was the eighth decline since last year. On a year-over-year basis, durable goods orders fell 2.2%, the biggest drop since the pandemic.
U.S. core capital goods orders for March, non-defense capital durable goods orders excluding aircraft, rose only slightly by 0.2% month-on-month in March, in line with market expectations, and the previous value was revised down to 0.4% from 0.7%. The year-on-year decline was 1.2%, the largest year-on-year decline since the pandemic. The data on core capital goods orders is closely watched by the market as it measures business spending plans.
The analysis pointed out that the second consecutive year of growth in core capital goods orders indicates that equipment investment has stabilized, but equipment investment has dragged down GDP in four of the past five quarters. This suggests that companies are cautious about capital spending, although some companies are still looking to improve productivity in the face of rising input costs.
The preliminary US GDP for the first quarter will be released on Thursday. Ahead of the durable goods report, the Atlanta Fed's GDPNow forecast showed a slight decline in business equipment spending in the quarter.
There was little volatility in the industry after the release of the data, with U.S. stock index futures extending slightly and Nasdaq 100 futures expanding their pre-market gains to 0.8%. The U.S. 10-year Treasury yield rose 2bp short-term to 4.651%.
Non-defense aircraft orders soar Computer-related orders plummeted month-on-month
Both defense and non-defense capital goods orders increased, with orders for nondefense aircraft surging more than 30% month-on-month.
The Commerce Department reported that commercial aircraft bookings, which fluctuated monthly, surged nearly 31 percent, roughly double the increase in February. Boeing reported 113 orders for March, up from 15 in February.
Orders for durable goods excluding transportation rose 0.2% month-on-month in March, in line with expectations, rising 1.3% year-on-year, and the previous value was revised down to 0.1% from 0.3%.
The AI bubble appears to be bursting, with orders for computers and related products plunging 3.9% month-on-month, the biggest drop since mid-2020.
Recent PMI surveys point to a mixed bag for the U.S. manufacturing sector, with the Institute for Supply Management's manufacturing indicators earlier this month showing factory activity expanding in March for the first time since September 2022, while the S&P preliminary April PMI contracted for the first time in four months.
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