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First Cut: New orders for factory goods in April slide on transportation, as expected

New orders for factory goods fell 0.8% in April after up 1.3% in March. The decline was entirely due to a 2.1% drop in durable orders which felt the impact of a 5.9% decline in transportation. Excluding transportation, durables orders were flat. Nondurable orders were up 0.5% in April after up 0.9% in March. Durables orders were held back by declines in orders for nondefense and defense aircraft, while nondurables saw gains in food, petroleum, and tobacco.

The data reflected revisions released on May 16. The headline was close to expectations and should not distract markets from other events.

Orders tend to alternate between softer and firmer months. April seems to fit that pattern. Slower economic growth has stymied some demand for hard goods and had a particular impact on transportation where sluggish motor vehicle sales have helped keep orders in check in addition to the troubles for Boeing and its 737 MAX aircraft. The crashes and Boeing’s response has come at the same time foreign demand for aircraft may be diminished. Some orders have been delayed or cancelled entirely.

Unfilled orders for April dipped 0.1% overall, with nondefense aircraft down 0.3%, a third month in a row and a trend that is at least in part due to the situation with Boeing.  Defense aircraft unfilled orders were up for a third month in a row, suggesting that military aircraft may make up some of the difference for the industry.

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