Good Capital Goods

Just a quick note on a busy day to pass along the news that durable goods orders rose at a decent 2.5% clip in March which suggests that manufacturing is still on the rebound. February’s data was also revised to show a slight 0.7% increase – originally it had been a decline.

The key here is to focus on the non-defense and non-transportation number. Both those sectors include very chunky items that can distort the underlying trend. So we exclude them when we want to get an idea of how much manufacturers and businesses generally are spending as they gear up for higher production. That adjusted figure, known as core capital goods, showed a healthy 3.7% increase. It is this report that supports a slightly more upbeat view of manufacturing. It also contrasts with some of the data we were seeing in the last few weeks that suggested a breather in the rebound. Perhaps that breather was weather related. In any case today’s news should be cause for cautious optimism.

My expectation remains for modest growth throughout the year. Not good. Modest.