Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  New Orders for Durable Goods Rose 3.2% in March
Posted Under: Data Watch • Durable Goods • GDP • Government • Inflation • Markets • Fed Reserve • Interest Rates
Supporting Image for Blog Post

 

Implications:   New orders for durable goods surged 3.2% in March, easily beating consensus expectations.  However, when you look past the headline, there isn’t much to like in the March report.  The surge in orders was due to the volatile commercial aircraft category, which after plummeting a combined 60% in the first two months of 2023, rebounded 78.4% in March.  Stripping out transportation, orders rose a tame 0.3% while prior month activity was revised lower.  Meanwhile, core shipments – a key input for business investment in the calculation of GDP – declined 0.4% in March and were up at a meager 0.1% annualized rate in the first quarter versus the Q4 average.  In the past year, orders for durable goods are up 4.6%, while orders excluding transportation are up 0.5%.  While those numbers would be okay in the low inflation environment that followed the Great Recession, producer prices for capital equipment are up 6.8% in the past year, which means that while orders are still rising in dollar terms, they are declining when adjusted for inflation.   A number of factors are likely to generate turbulent footing in 2023: a tighter Federal Reserve, the tightening of lending standards following recent stress in the banking sector, and withdrawal symptoms following the COVID-era economic morphine that artificially boosted both consumer and business spending.  In addition, the return toward services means a large portion of goods-related activity will soften in the year ahead, even as some durables that facilitate services recover.  One of the most important pieces of today’s report, shipments of “core” non-defense capital goods ex-aircraft declined 0.4% in March while the previous month was revised lower.  Despite the surge in January, which likely benefited from seasonal adjustment factors that took growth away from the final months of 2022, this measure barely managed to eke out a gain in the first quarter of 2023.  While we are forecasting the economy grew at a 2.2% annual rate in the first quarter, don’t expect Real GDP to remain positive much longer.  We think the second quarter will likely be weaker than Q1, and possibly negative.  As for other economy-wide news, the Federal Reserve reported on Tuesday that the M2 measure of the money supply dropped 1.2% in March, is down 4.1% from a year ago, and is down at a 6.1% annualized rate from the peak in July.  Not only have we never experienced a Fed trying to fight an inflation problem under an abundant reserve regime, we’ve never seen M2 grow so fast for so long, or decline so rapidly, at least since the Great Depression.  If the recent data are accurate, this is not a good sign for Real GDP growth in the year ahead and consistent with our view that we’re headed for a recession.

Click here for a PDF version

Posted on Wednesday, April 26, 2023 @ 10:43 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.