Implications: New orders for durable goods ended the first quarter on a healthy note, rising 0.8% in March on top of upward revisions for February. While auto orders boomed, rising 5.0% in March, orders for both commercial and defense aircraft fell, nearly fully offsetting autos to leave transportations up a more modest 0.2%. As a result, if you strip out the typically volatile transportation sector, orders grew a healthy 1.1%. Electrical equipment orders rose 3.9% – the largest monthly increase for that category in more than a year – followed by computers and electronic products (+2.6%), primary metals (+1.5%), fabricated metal products (+0.8%), and machinery (+0.7%). With unfilled orders continuing to rise – and standing today at a record high – we expect activity to remain robust as companies battle to keep up with demand growth that has far outpaced supply. One of the most important pieces of today's report, shipments of "core" non-defense capital goods ex-aircraft (a key input for business investment in the calculation of GDP), rose 0.2% in March following strong prints in January and February. These shipments rose at a 15.8% annualized pace in Q1 versus the Q4 average, and provide a healthy tailwind to first quarter GDP growth, at which we will get our first official look this Thursday. Companies have seen an extremely sharp recovery, with orders up a combined 69.9% since the April 2020 bottom and now sit 19.1% above the pre-pandemic high set in February 2020. We expect business investment will remain a tailwind for GDP growth throughout 2022 as companies continue to reopen and recover from the severe economic consequences of the COVID shutdowns.
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