Unexpected Surge in Durable Goods Orders: What it Means for U.S. Business and GDP Growth

In a surprising turn of events, new orders for durable goods increased by 0.7% for the third consecutive month, driven primarily by an unexpected jump in aircraft orders. This rise in transportation equipment orders, which largely reflects aircraft sales, contributed to the overall increase in durable goods orders.

While April’s increase in durable goods orders wasn’t as strong as the previous month’s jump, it still exceeded economists’ expectations. Forecasters had anticipated a 0.5% decline in durable goods orders, which serve as a barometer for U.S. business investment. However, core capital goods orders, which indicate the underlying trend in capital spending, surpassed expectations and reversed the prior month’s decline.

In addition to the increase in aircraft orders, there was also a notable rise in motor vehicles and parts orders for the sixth consecutive month. This data suggests the potential for stronger-than-expected gross domestic product (GDP) growth in the second quarter, according to senior economist Sal Guatieri of BMO Capital Markets. Despite current borrowing costs and loan standards, U.S. business investment may pick up in the coming months, although the manufacturing sector overall is expected to remain sluggish until interest rates decrease and global economic conditions improve.