U.S. February Durable Goods Orders - Strong month may be difficult to sustain
February durable goods orders are stronger than expected with a 0.9% rise overall and a 0.7% rise ex transport. This may be a response to strength in January ISM manufacturing orders, but slower ISM data for February suggests the February durable goods orders gain may be difficult to sustain.
Transport orders had been expected to fall due to weaker orders at Boeing, and civil aircraft orders did decline. However this was offset by a strong month for autos, which may be an attempt to beat expected tariffs, and a positive contribution from defense, which has a large overlap with transport. Orders ex defense rose by 0.8%.
The ex transport increase is the strongest since March 2022, though follows two subdued gains of 0.1% and a decline in November. As tariffs are stepped up, trend is at risk of softening.
While the ex transport data was above trend after some subdued months, non-defense capital orders ex aircraft, a key indicator for business investment, corrected lower by 0.3% after an above trend 0.9% increase in January. The 6-month average in this series of 0.3% is however still slightly above the 0.2% 6-month average ex transport.
Shipments for non-defense capital ex aircraft saw a reverse mix to orders, with a 0.9% increase after a 0.2% January decline, meaning some support for the GDP picture from the February bounce. Inventories however rose by only 0.1%, remaining subdued despite a surge in January imports.
