Implications: After January's jump, durable goods showed broad-based declines in February, led by falling orders for aircraft and machinery. Orders for "core" capital goods - non-defense excluding aircraft - fell 1.8% while shipments (which the government uses to calculate business investment for GDP purposes) fell 1.1%. This comes in contrast to the regional manufacturing reports that have shown activity in the manufacturing sector stabilizing and starting to turn higher. Aircraft orders, which are very volatile from month to month, fell 27.7% as Boeing reported just 2 aircraft orders in February down from 68 in January. But while aircraft pulled down orders from the transportation sector, orders for motor vehicles rose for a fourth consecutive month. As a whole, today's report suggests that companies continue to pare back inventories, which fell 0.3% in February and are down in seven of the last eight months, after overbuilding them in early 2015. But inventories are a temporary factor. A large rise in inventories provides a temporary boost in one quarter, but we pay it back in future quarters, exactly like we're seeing right now. Expect further gains in the coming months as inventories stabilize and companies restock. Consumer purchasing power is growing with more jobs and higher incomes, while debt ratios remain very low, leaving room for an upswing in big-ticket spending. Meanwhile, profit margins are high and corporate balance sheets are loaded with cash. In other news this morning, new claims for unemployment benefits increased 6,000 last week to 265,000, marking 55 consecutive weeks below 300,000, the longest stretch in more than forty years. Continuing claims declined 39,000 to 2.18 million. Plugging these numbers into our model suggests payrolls are up about 241,000 in March, another solid month. The four-week moving average of initial claims, 260,000, is the lowest since 1973. In other words, very few layoffs are occurring in spite of what looks like a 1.5% real GDP growth rate in the first quarter. The Plow Horse economy just keeps plowing along.
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