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April 24, 2013 2:15 pm
Durable goods orders in the US recorded their biggest fall in seven months adding to growing evidence of a mediocre March for the world’s largest economy.
The data are not yet weak enough to suggest a slowdown in the US economy but optimistic hopes of an acceleration will – yet again – have to be put on hold.
A combination of weaker payrolls, retail sales, business confidence and now capital spending is likely to temper any talk of an early taper to the US Federal Reserve’s QE3 programme of asset purchases when it meets next week.
“The sharp decline in durable goods orders in March is another indication that, after a pretty strong first quarter, the recovery is losing momentum again,” said Paul Ashworth at Capital Economics in Toronto.
Orders for goods expected to last more than three years fell 5.7 per cent last month – the most since August – following a downwardly revised 4.3 per cent gain in February, the commerce department said on Wednesday.
The volatile transportation component declined 15 per cent because of a big drop in aircraft sales. Boeing, the aerospace company, said it received orders for 39 aircraft in March, down from 179 placed in February.
But excluding transportation, durable goods orders fell by 1.4 per cent after a drop of 1.7 per cent in February, confirming a slowdown in manufacturing activity towards the end of the first quarter.
“The weak tone of this report underscored the emerging narrative of a considerable slowing in economic growth momentum in March,” said Millan Mulraine, strategist at TD Securities. He also pointed to “a broad-based contraction in capital investment intentions”.
After a strong January and February, when consumers seemed to shrug off a payroll tax rise at the start of the year, hopes were high that the US economy would accelerate during 2013 with the help of a recovery in the housing market.
But the run of weak data from March has damped those hopes. Weakness in some overseas markets – notably China – and the start of $85bn in sequestration cuts to public spending may now be weighing on the economy.
The weak durable goods report prompted analysts to downgrade their tracking estimates for first-quarter growth in gross domestic product. An initial estimate from the Bureau of Economic Analysis is due on Friday.
Macroeconomic Advisers lowered its estimate from 3.2 to 3.1 per cent and Barclays cut its forecast from 3 to 2.9 per cent. Those relatively strong forecasts reflect a bounce from artificial weakness in the fourth quarter of 2012 – when growth was just 0.4 per cent – rather than a big acceleration in the economy.
Orders for non-defence capital goods excluding aircraft, a key gauge of business investment, edged 0.2 per cent higher after a 4.8 per cent slide in February. Shipments of these goods, which are used to calculate economic growth, ticked 0.3 per cent higher in March.
Aside from a decline in aircraft orders, there were negative readings in other categories such as electrical equipment, machinery, primary metals and fabricated metals. Only computers and electronics recorded an increase in order activity.
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