Implications: Durable goods data underwent a "benchmark revision" in April, which altered the level of overall orders and affected past monthly changes more significantly than usual. As a result, while the April durable goods orders decline of 0.7% suggests a slow start to Q2, we see no reason to sound an alarm. Following healthy gains for overall orders in February (1.4%) and March (2.3%), a lull in April was not unexpected. Commercial aircraft orders led the decline, though orders for most major categories fell. Strip out the typically volatile transportation sector and durable goods orders declined 0.4%, coming in below the consensus expected gain of 0.4%. The dip in April non-transportation orders was led by fabricated metal products and machinery. But there is little reason for concern. Non-transportation orders have been steadily trending higher since mid-2016 – up 4.9% in the past year – and April represents the first monthly decline since August. Despite the dip in machinery orders in April, we expect them to pick up again in the months ahead alongside continued improvements in the energy sector, which had been pulling down machinery investment after oil prices started declining in mid-2014. Across the board, companies may be waiting for Washington to make progress on tax reform and other issues, which could provide a boost to orders and increase investment in most durable goods sectors. In the meantime, economic growth continues to plow ahead, with new claims for unemployment insurance increased 1,000 last week to 234,000. The four-week moving average is a four-decade-low 235,000. Continuing claims rose 24,000 to 1.92 million. Plugging these figures into our models suggests robust job growth in May, with a payroll gain of around 200,000.
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