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First Cut: Durables orders decline in double digits for a second month in a row in April

New orders for durable goods slumped for a second month in a row at down 17.2% in April after down 16.6% in March. A 47.3% decline in transportation orders was a large reason for the decline as orders for aircraft and motor vehicles plummeted. However, even the down 7.4% excluding transportation was weak and due to sharp declines across sectors. The odd man out was a 1.7% increase in communications equipment in April after the 0.6% rise in March. Individuals and offices have needed to upgrade their infrastructure with work-from-home still very much in effect, and businesses to improve their capacity for online sales.

“Core” new orders – new orders less civilian aircraft capital goods and defense capital goods – were down 18.2% in April, accelerating the downward trend of the last few months.

Boeing’s troubles after the air disasters associated with its 737 MAX aircraft have been compounded by the arrival of the global recession – what one colleague calls the Covid Contraction. Hefty cancellations of aircraft orders at Boeing – not just for the 737 MAX – have kept orders for nondefense aircraft down for months. Nondefense aircraft orders were down 46.9% in April after falling 283.8% in March. Defense aircraft orders have been uneven. April saw a 32.7% decline after an increase of 35.8% in March.

Unfilled orders continued to decline along with the erasure of the backlog for aircraft and was down 1.6% in April. Shipments decreased 17.7% in April with so few orders to move along the pipeline. Inventories were up 0.2%, a small increase that is well within normal month-to-month variation and which reflects rapid responses to control goods from accumulating in the face of a severe economic downturn.

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