US: Underlying momentum in manufacturing remains strong – Wells Fargo

Durable goods orders increase 0.5% in March, after a decline of 0.9% in February.  Analysts at Wells Fargo point out that aircraft orders were largely to blame, but they noted supply chain issues are holding back activity as well.

Key Quotes: 

“Durable goods orders rose just 0.5% in March which was well short of consensus expectations for a gain of 2.3%. The fact that February durable goods figures were revised to show a smaller decline than initially reported takes some, but not all, of the sting out of it. A drop in orders in categories not closely tied to near-term business spending, like aircraft as well as defense, account for much of the shortcomings.”

“Excluding transportation, orders rose a solid 1.6% and suggest that the impressive run in household goods spending and business investment since COVID is far from over. However, strength in March looks to be more closely tied to robust demand from consumers as another round of direct checks from the federal government went out last month and retail sales soared.”

“While the factory sector continues to contend with the unique growing pains caused by a global pandemic, the underlying momentum in manufacturing remains strong. Hiring picked up in March, with factories bringing on an additional 53K workers in a sign strength is expected to continue, and the early April purchasing manager indices have done just that. The new order indices in the New York, Philadelphia and Kansas City Fed manufacturing surveys rose to a 17-year high in April when averaged together.”