Durable goods orders fall but underlying data suggest resilience

A key US manufacturing gauge fell by the most in four months in February amid a sharp fall in aircraft orders. However, underlying data suggest that the American economy may be more resilient than the recent run of economic reports suggest.

Orders for long-lasting US goods fell 1.6 per cent to $250.6bn in February from January, according to the US commerce department. The fall was slightly smaller than the 1.8 per cent the market had forecast and compares to January’s gain, which was revised down to 0.1 per cent from 0.3 per cent.

Excluding the volatile transportation sector, however, orders were 0.1 per cent higher, beating economists’ expectations of a 0.2 per cent decline.

The biggest drag on the headline durable goods figure came from a 31.1 per cent drop in orders for non-defence (civilian) aircraft, which tend to fluctuate dramatically from month to month.

Orders for non-defence capital goods excluding aircraft, which are seen as a proxy for business investment, were 0.1 per cent lower, compared to expectations for a 0.1 per cent gain.

Investors have been closely watching US economic data for clues on the direction of the world’s most important economy. A spate of disappointing readings, including on retail sales, had heightened fears that the US economy may be heading for a big slowdown in first-quarter growth. However, that was offset somewhat this week by the rebound in US manufacturing.

After raising interest rates four times in 2018, the US Federal Reserve did a U-turn on policy in March and scrapped plans for more rate hikes this year in response to tepid inflation and signs of slowing global growth.