Durable Goods orders in the past few months have closely mirrored the ups and downs of the manufacturing industry. After a slight increase in February 1.4% following January’s decline, economists predict a headline number increase of around 2%. As jobs continue to increase and Boeing finds their footing after a contentious start to the year – here are the key metrics to look at in March’s report.
Increase in Boeing orders:
Airlines are ramping back up their orders of Boeing aircraft, following a rocky start of the year for the aerospace giant. Economists say the increase in new orders is a sign of the industry’s turnaround and will be a key driver of March’s headline number. According to a report already released by Boeing, there have been 29 deliveries and 113 orders for their aircraft in March. “March is generally the turnaround month for aircraft orders. So we expect that to show up in the report then for the excluding. transportation portion. We are at a two times increase again, fairly leveled out due to aircraft being excluded from it,” said Nate Bilsky, US economist at Jeffries.
Capital Expenditures (Capex):
The increase in aircraft orders may be an outlier in the report – as capital expenditures have stayed relatively flat so far in 2024. Lawrence Werther, Chief US economist at Daiwa Capital Markets, says he’s not expecting much growth in this area until next year. “I think there’s an expectation among firms that capex investment will increase as interest rates come down. So I’m expecting the performance in orders in early 2025 to be better – not robust, but better,” said Werther.
Interest Rates:
New Orders staying flat are largely due to steadily high interest rates – which are not expected to be cut at the Fed’s next meeting in May. Little change is expected in manufacturing this month, as companies remain weary about increased investment in orders across the board, excluding transportation.
Some experts have argued an interest rate cut could come as soon as July, while others don’t expect to see cuts in 2024. Inflation data releases in the coming months will be a key indicator of potential rate cuts moving forward.
Defense capital goods:
Orders for defense capital goods plunged 12.7% last month – a substantial change in this number could indicate either contract changes in February or production adjustments could have caused the decline.
Purchasing Managers Index (PMI):
A preview into April PMI data sent a wave of concern across industries, after a dip to 49.9, the lowest it’s been in the last four months. This could be a continued sign of softening demand across the industry as a trend this year. As companies and investors remain in limbo with the Fed and inflation, this number will be important to watch in the coming months.
