U.S. durable goods fall in February, implies subdued rate of equipment spending in Q1 2019

The U.S. durable goods orders dropped in the month of February, implying only a tepid rate of equipment spending in the first quarter. The inventory picture emerging in recent reports though indicates towards a stockpiling which might bring a needed boost, noted Wells Fargo in a research report.

Durable goods orders dropped 1.6 percent, and after taking revisions into account, were consistent with expectations. Excluding the volatile transportation sector, durable goods rose 0.1 percent reclaiming a loss of around the same magnitude in January. Equipment spending is set for a subdued outturn in the first quarter, said Wells Fargo. Nondefense capital goods shipments were up 0.6 percent; however, after a 1.5 percent fall in January are still below the fourth quarter average.

Durables inventories were up 0.3 percent in February. A separate report released yesterday showed that business inventories rose 0.8 percent in January, well above the 0.5 percent expected. A more rapid rate of inventory building might stimulate GDP growth in the first quarter.

“It’s at least somewhat concerning though that the stockpiling appears to be unintended. The inventory-to-shipments ratio has risen two months in a row”, said Wells Fargo.

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