US durable goods orders slump the most since 2014, weighed down by the coronavirus pandemic and canceled Boeing orders

• New orders for durable goods in March fell 14.4% after a 1.1% revised increase in February, according to a Friday report from the Commerce Department.
• Transportation equipment fell 41% in March, leading the report lower. That was led by a 300% drop in orders for non-defense aircrafts, likely due to decreased Boeing orders.
• New core capital goods orders, which exclude aircraft, rose 0.1% in March following a 0.8% decline in February.
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US durable goods declined in March by the most since 2014, weighed down by falling oil prices, the coronavirus pandemic, and a decline in orders for Boeing aircraft.

New orders for durable goods in March fell 14.4% after a 1.1% revised increase in February, according to a Friday report from the Commerce Department. The median estimate was a decline of 12% from economists surveyed by Bloomberg.

Transportation equipment fell 41% in March, leading the report lower. Much of the drop can be attributed to a huge decline in new orders for non-defense aircraft and parts. In March, the category had negative orders of $16.3 billion, a nearly 300% drop from the previous month. This decrease is likely the result of canceled Boeing orders. Other parts of the report exceeded economist's expectations. Orders excluding transportation dipped 0.2% in for the month, outperforming the consensus estimate of -6.5%.

"The March numbers were better than we expected; presumably, it takes a bit of time for management decisions to cut spending to filter into the hard numbers," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a Friday note.

New core capital goods orders, which exclude aircraft, rose 0.1% in March following a 0.8% decline in February. Shipments of core capital goods dipped 0.2% in March, after a 0.9% decline in the previous month.

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While Friday's report was rosier than many expected, economists foresee further pain ahead. Shepherdson thinks that April core capex could fall 20% to 30%, outpacing the worst month during the Great Recession of -11.1% in January 2009. "We can't be too upbeat," James Knightley, chief international economist at ING, wrote in a Friday note. "We still expect to see investment fall sharply through 2Q and given the long lead times, we suspect we will also see hefty falls in 3Q irrespective of whether the economy has re-opened by then."

He continued: "With manufacturing surveys pointing to output contracting 20%, there is little need to increase productive capacity while the carnage in the oil industry given recent price plunges suggests this capex hungry sector is also going to face major cutbacks in expenditure."

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