Implications:  New orders for durable goods showed strength once again in April, rising 7.9% and continuing a trend that started in mid-2025. Not only did the headline come in well above consensus expectations, but underlying activity remained healthy. Transportation is a notoriously volatile category month to month, so we prefer to focus on orders excluding transportation for a better check on the broader economy. Orders excluding transportation continue to rise, up 1.1% in April and 9.1% in the past year, the largest annual gain since June 2022. The only major category outside transportation to decline in April was computers & electronic products, dropping 0.7%. However these orders are up 14.9% in the past year, the second largest annual increase for the category in about twenty years (only last month was higher at 16.3%). Other categories to rise in the month were fabricated metal products (+3.5%), primary metals (+1.9%), and electrical equipment (+0.6%). Note that orders for most of the major categories have picked up steam recently: primary metals, fabricated metal products, machinery, and computers & electronic products have each experienced double-digit growth in the past year. As a result, factories are having a hard time keeping up, with unfilled orders up 11.5% in the past year, the most for any 12-month period in more than four years. Arguably the most important number in today’s release is core shipments – a key input for business investment in the calculation of GDP – which rose 0.4% in April.  If unchanged in May and June, core shipments would rise at a 6.8% annualized rate in Q2 versus the Q1 average.  Business investment has shown strength recently as core shipments have consistently risen since mid-2025, driven by a more favorable tax environment and artificial intelligence spending.  In other recent news, the Philadelphia Fed Manufacturing Index, a measure of factory sentiment in that region, dropped to -0.4 in May from 26.7 in April.  The Kansas City Fed Manufacturing Index, a measure of factory sentiment in that region, slipped to 8 in May from 10 in April. Finally, the Richmond Fed index, a measure of mid-Atlantic factory activity, jumped to 13 in May from 3 in April.

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