Look Under the Hood: April Durable Goods Increase

May 24, 2024

April durable goods orders rose 0.7%, exceeding market expectations. The consensus expectation was for a decline of 0.8%. March durable goods orders saw a sharp downward revision to 0.8% from the earlier reported 2.6%. Taken into context, when both months are considered, the headline increase in April orders is not as strong as it first appears.

Transportation orders rose 1.2% in April after rising 2.5% in March. Civilian aircraft orders were a drag in April as they fell 8%. Boeing booked orders of just 7 planes in April versus 113 in March. Orders for motor vehicles and parts rose 1.5%, stretching out a string of increases for the sixth consecutive month. Despite affordability issues impacting certain segments of the buying public, consumers, for the most part, continue to purchase new vehicles. Cox Automotive reports that average transaction prices in April were $48,510, down 0.5% from a year earlier. 

Orders for computer products rose 3.9% and communications equipment orders increased 3.3%. The digital economy continues to see an infusion of capital spending due to generative AI demand. 

Other key industries showed gains in April. Primary metals orders increased 1.3%, machinery orders rose 0.4%, and fabricated metals were up 0.3%.

The shipments data for April was consistent with our projection for modest business spending in the second quarter. Nondefense capital goods shipments excluding aircraft, which serve as a proxy for nonresidential investment spending in the current quarter, rose 0.4% in April. We project 2% growth in business investment in the second quarter on a seasonally adjusted, annualized basis. This compared with 2.9% growth in the first quarter of 2024.

Core orders, which represent capital goods orders excluding defense and aircraft and are a proxy for future business spending, rose 0.3% in April. This metric has been oscillating between positive and negative readings since the start of the year, which could represent uncertainty creeping into business leaders’ decisions. Policy uncertainty associated with the November U.S. elections, escalating geopolitical tensions and trade policy were among the most cited risks by respondents in the Federal Reserve's latest Financial Stability Report.