Durable Goods Report Weak

There's no Boeing-related catastrophe yet but manufacturing is indeed slumping, confirmed by a broadly weak durable goods report for April. Orders in the month fell 2.1 percent to nearly hit Econoday's very soft consensus for 2.2 percent while ex-transportation orders were unchanged and again very near expectations for a 0.1 percent decline. What came in at the bottom of expectations were orders for core capital goods which fell 0.9 percent in April. And a sharp downward revision for this category in March, to a 0.3 percent increase from an initially reported 1.3 percent rise, underscores the fundamental slowing underway in manufacturing demand.

The list of negatives is unfortunately convincing: orders for primary metals down 0.8 and 1.9 percent the last two months; fabrications up 0.4 percent in April but following 1.6 and 2.1 percent declines the prior two reports; machinery up 0.1 percent in April following a 2.0 percent drop in March; new vehicles down 3.4 percent in April and civilian aircraft down 39 percent.

Civilian aircraft is always volatile month-to-month but April's decline is tame given outside expectations for gigantic contractions tied to 737 cancellations. Unfilled orders for civilian aircraft did slip but only 0.3 percent in April vs declines of 0.1 and 0.5 percent in the prior two months.

The big 737 fallout, if there will be one, has yet to hit but what is hitting is generally sliding demand for manufactured goods in what reflects generally weak global demand. But it's the decline in capital goods that headlines April, pointing to lack of momentum for business investment going into May and the breakdown of US-China trade talks.