NEW YORK (Reuters) - Demand for long-lasting manufactured goods dropped by the most in three years in March and a gauge of business spending plans fell, suggesting factory activity lost momentum as the first quarter ended.
ELLEN ZENTNER, SENIOR U.S. ECONOMIST, NOMURA SECURITIES, NEW YORK
“A good deal of that (4.2 percent decline) was in transportation equipment, which was the big drop in billing orders over the month. But the headline drop was still bigger than expected even when you account for billing orders.
“If you look at it from a momentum perspective, this adds to the evidence that momentum in the economy sort of fell flat in March. You had the first two months coming in with a lot of upward surprises, then the data started to become more mixed and many of the indicators in March came in to the downside.
“What this tells us for business investment is that a lot of steam, the wind has been taken out of the sails, going into the second quarter.
“The component of non-defense capital goods shipments excluding aircraft is the component for calculating GDP and that was much stronger than expected for March. So it’s likely to lift estimates, believe it or not, for Q1 GDP.
“But forward looking this report implies a fairly weak outlook for business investment.”
“It’s a disappointing report, not so much because of the headline number which was due to an expected large drop in aircraft orders.
“The most disappointing aspect of the report was the 1.1 percent decline in orders excluding transportation. Several categories contributed to that decline: primary metals, fabricated metals, and machinery. Orders have flattened in the last few months.
“Another category we keep a close eye on is orders for non-defense capital goods excluding aircraft, a proxy for business spending, and they have been moving sideways.”
VASSILI SEREBRIAKOV, SENIOR CURRENCY STRATEGIST, WELLS FARGO, NEW YORK:
“The durable goods data is known to be a volatile series. A deviation from consensus is not uncommon. But looking at the overall picture, the breakdown of the report mitigates the negative headlines. Overall, the report doesn’t really change the overall picture and still supports moderate U.S. growth. We did get a move lower in the dollar against the yen and euro, but that should be short-lived because we have the Fed this afternoon.”
JIM AWAD, MANAGING DIRECTOR AT ZEPHYR MANAGEMENT IN NEW YORK
“Far worse than expected. Futures were up strongly on Apple, but this will create doubts about the strength of the recovery and reinforce the bears. Today will be a tug of war between doubts about economic strength and good earnings from several companies.”
STOCKS: U.S. stock index futures trim gains.
BONDS: U.S. Treasury debt prices pare losses.
FOREX: Dollar extends losses versus the yen.
Americas Economics and Markets Desk; +1-646 223-6300