New orders for durable goods (DG), gained 0.7% in March, its third month in a row of advances. On a three month moving average (3MMA), assessment, DG were up 1.8% month on month and up 2.0% year on year. Manufacturers added 11,000 jobs in March as payrolls increased by 49,000 in Q1. This was the strongest increase in manufacturing jobs since Q4-2014.
The Advance Report on Durable Goods (M3), provides statistics on manufacturers’ value of shipments, new orders, end-of-month unfilled orders and total inventory. Data are collected and tabulated by six-digit NAICS (North American Industry Classification System). The M3 is based upon data reported from manufacturing establishments with $500 million or more in annual shipments. Units may be divisions of diversified large companies, large homogenous companies, or single-unit manufacturers in 89 industry categories
Figure 1 shows the history of durable goods orders from 2015 to present on the left-hand scale and the percentage change y/y on the right-hand scale. Capital goods orders advanced by 2.5% month on month (m/m). Defense orders fell 7.7% m/m, while non-defense orders ramped up 2.5% m/m. Core capital goods orders posted growth of 0.4% m/m. This month’s DG report contained welcome news for the primary metals sector which added a strong 0.8% m/m and was up 5.0% y/y. Automobile orders slipped 0.8% m/m but were up 1.9% on a year on year (y/y), basis. Durable goods inventories rose 0.1% m/m, or $500 million, and are up 0.2% from a year earlier.
Data for manufacturers was mostly positive. Businesses are bullish about the steps the Trump administration are taking to ease its regulatory and income tax burden. Expectations are that Trump is just getting started and that US manufacturing activity will continue to prosper going forward. In addition businesses have solid balance sheet, access to relatively low cost capital and the demand side of the equation is gaining strength. Consumer confidence is also strong which will drive stronger spending in the months ahead. Wage pressures are starting to emerge as the economy marches toward full employment. This will help reinforce consumer spending and keep the progress going.
At Gerdau, we routinely monitor durable goods orders since it provides a good read on the current health of the US manufacturing economy and its probable short-run future.