Transportation equipment leads durable, core capital goods orders growth

New orders for durable goods and core capital goods increased again in March as companies continued to navigate rising interest rates.  

Seasonally adjusted new orders for manufactured durable goods decreased for the second straight month, coming in at $283.4 billion in March, up 2.6% month over month after a revised 0.7% growth in February, according to the Monthly Advance Report on Durable Goods Manufacturers’ Shipments Inventories and Orders, released by the U.S. Census Bureau today. 

Seasonally adjusted shipments for manufactured durable goods were $282.4 billion, down 2 basis points (bps) MoM. 

March’s seasonally adjusted value of core capital goods orders, which excludes aircraft and defense equipment, landed at $73.8 billion, an increase of 0.2% MoM following a revised 0.4% decline in February. Seasonally adjusted shipments for core capital goods landed at $74.5 billion in March, up 0.2% MoM. 

Transportation sector provides order boost 

Despite declining orders for Class 8 trucks in March, the wider transportation sector provided a boost to durable goods and core capital goods orders. New orders for transportation equipment rose 7.7% MoM to $95.9 billion in March, while motor vehicles and parts rose 2.1% MoM to $63.1 billion.

However, signs of hesitant demand remain, according to a Wells Fargo research note. 

“In stripping the broader transportation category from the estimate, orders were up a more modest 0.2% last month, which is roughly in line with a typical monthly gain,” according to the note. “The underlying order details were somewhat mixed as the data continue to indicate a hesitant demand environment.” 

Meanwhile, transportation equipment shipments declined 0.5% MoM to $89.4 billion, according to the durable goods report. 

Unfilled orders, total inventories  

Seasonally adjusted unfilled orders for durable goods totaled $1.4 trillion in March, up 0.4% compared with February, while total inventories for durable goods finished at $527.9 billion in March, down 0.1 bps MoM., 

Seasonally adjusted unfilled orders for core capital goods reached $266.9 billion in March, down 0.2% compared with February, while total inventories for core capital goods hit $163 billion in March, up 0.1% MoM. 

While the positive durable goods report indicates improving economic health, capital expenditures continue to reflect the impact of high interest rates, according to the Wells Fargo note. 

“Ultimately, the capex environment remains hindered by elevated borrowing costs and increased uncertainty around the path of Fed policy and the economy generally,” the note stated. “There are some encouraging signals, such as the ISM manufacturing index returning to expansion territory, but small-business plans to make new capital expenditures or expand operations remain constrained.” 

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