Durable Goods Orders Slip, Downside Risk to Q1 Equipment Spending

Source: Economics Group of Wells Fargo Bank, N.A.Summary Durable goods orders slipped again in February, and the trend in core capital goods orders is growing less favorable. Rapid Fed tightening, the pull back in lending standards and increased economic uncertainty are unfavorable conditions for new capital investment. Conditions Growing Less Favorable for New Cap-Ex New orders for durable goods slipped again in February, declining 1% after a 5% drop a month earlier (chart). While most weakness can be traced to aircraft and defense orders specifically, demand for new capital expenditures is losing momentum. That is, even discounting some of the transportation related volatility on the headline orders data, the modest 0.2% rise in core capital goods orders (which are non-defense and exclude aircraft) comes after January’s stout 0.8% gain was revised to just 0.3%. The recent run-rate for core orders is thus less encouraging but still positive; core capital goods orders are up at a 0.3% annualized rate over the past three months (chart). READ FULL ARTICLE>>