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U.S. orders for durable goods declined in March by the most since 2014 as the coronavirus and slumping oil prices reverberated through the manufacturing sector and spurred cancelled orders for Boeing Co. airplanes.
Bookings for goods meant to last at least three years dropped 14.4%, led by slumping demand for commercial aircraft, after a revised 1.1% gain in February, Commerce Department data showed Friday. The median projection in a Bloomberg survey of economists called for a 12% decrease. Closely watched core capital goods orders, which exclude aircraft and military hardware, rose 0.1%, compared with estimates for a steep decline.
Orders for most types of durable goods declined in March, including motor vehicles and metals. By far the sharpest drop was in civilian aircraft, which recorded negative orders of $16.3 billion, or a drop pegged at close to 300% from the prior month, likely reflecting canceled orders and accounting changes for Boeing planes.
Shipments of core capital goods, a proxy for equipment investment in the government’s gross domestic product report, fell 0.2% after declining 0.9% in February. The Commerce Department’s initial estimate of first-quarter GDP, scheduled for next week, is projected to show the fastest rate of contraction since 2009 amid widespread business closures and stay-at-home directives, all but confirming the record-long U.S. expansion is over.
The drop in business investment is likely to extend through the second quarter, as most places remain closed, fewer people shop and factory output declines. Oil and gas producers, meanwhile, are cutting back on capital spending as the price collapse makes it unprofitable to drill.
The March numbers on capital goods orders were better than expected, and “presumably, it takes a bit of time for management decisions to cut spending to filter into the hard numbers,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note.
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