Chill Persists in March U.S. Durable Goods Report

Aircraft and defense orders pushed headline orders to a solid increase in March, but the underlying details were less robust. Modest inventory accumulation and slumping order backlogs are troubling signs that production will remain slack into the current quarter. This should become evident in next week’s production gauges from the Chicago PMI and manufacturing ISM.

• Headline orders rose 4.0 percent following a -1.4 percent decline in February. The headline gain was stronger than forecasters anticipated (0.6 percent), but this was largely due to a 34.1 percent jump in civilian aircraft orders and a 17.0 percent rise in defense goods. Headline orders are down -3.8 percent annualized relative to Q4 2014, and up just 0.7 percent in year-on-year terms.