Factory Orders Continue To Show Strength

February and March were good for the nation's factory sector with new orders up 1.6 percent in both months. Aircraft orders were very strong in both months excluding which, along with other transportation equipment, orders were much more subdued, at gains of only 0.2 percent in February and 0.3 percent in March.

Orders for metals, including both steel and aluminum, did rise in sharply in March, a month when import duties were imposed, but sizable monthly gains (as well as losses) are routine for these readings where volumes, compared to the whole, are small. Inventories for steel and aluminum also rose sharply in March, but again not out of the ordinary.

Orders for capital goods (nondefense ex-aircraft) fell 0.4 percent but follow March's strong 1.0 percent gain. Business investment has been very strong (as highlighted in yesterday's FOMC statement) but a second month of decline in April for capital goods would definitely raise questions. Construction materials, an area to watch for tariff effects, also slipped 0.4 percent and follow a 0.3 percent gain in February.

The split between order gains for durable and nondurable goods is 2.6 percent for the former, again reflecting aircraft, and 0.5 percent for the latter reflecting gains for coal and petroleum.

An important positive in today's report is an outsized 0.8 percent rise in total backlogs where builds until now have been mostly modest. Inventories rose a steady 0.3 percent in a March report which, in sum, points to an aircraft-led factory sector that looks to contribute significantly to the 2018 economy.