INDICATOR: April Durable Goods Orders
KEY DATA: Orders: +3.3%; Excluding Aircraft: +1.9%; Business Capital Expenditures: 1.2%
IN A NUTSHELL: “Neither weakness abroad nor dumb policies at home can prevent the manufacturing sector from growing.”
WHAT IT MEANS: We have China slowing sharply (though how much is anyone’s guess as it is hard to believe their numbers), Europe going nowhere and Washington putting up stop signs wherever it can yet manufacturing continues to grow. Durable goods orders rebounded from a sharp decline in March to post a solid gain in April. Improving conditions were seen across the economy as machinery, electrical equipment, metals, motor vehicles and communications equipment all posted solid gains. The only weakness was in computers, which after surging in February has faltered for the past two months. In addition, it appears that businesses are buying into the full recovery story as the closely watched measure of investment, capital goods excluding transportation and defense was up solidly for the second consecutive month. Order books are filling so production should begin to pick up soon.
MARKETS AND FED POLICY IMPLICATIONS: This was a good report but we did have a worse one last month. And again it is necessary to remind everyone that durable goods orders are lumpy in that they don’t occur every month. That creates the huge volatility we see in them. Nevertheless, given all the barriers to growth, it is clear the economy continues to move forward. Without the self-inflicted wounds and the external issues, we might have had strong growth. Regardless, the orders rise was above expectations so investors will probably like the report. Nevertheless, with Japan’s market resembling the roller coasters that will be opening at the Jersey shore this weekend and the upcoming Memorial Day holiday in peoples’ minds, who knows what will happen inn the markets. And on that note let me say: Have a happy Memorial Day weekend!