Equipment Spending, Confidence Weak: U.S. Economic Takeaways

U.S. Consumer Confidence Falls to 94.2 in April
  • Orders for durable goods increase less than forecast
  • Consumer sentiment stumbles on dimmer views of economy, jobs

What you need to know about Tuesday’s U.S. economic data:

DURABLE GOODS ORDERS (MARCH)

  • Rose 0.8 percent (forecast was 1.9 percent) after revised 3.1 percent drop
  • Capital goods orders minus military hardware, aircraft unchanged after a 2.7 percent decrease
  • Shipments of core capital goods rose 0.3 percent after falling 1.8 percent

The Takeaway: Manufacturing continues to disappoint. The increase was driven by a sharp rebound in orders for military aircraft, but after stripping out demand for transportation equipment, durable goods orders fell. Weak business investment remains a common theme as companies seem weigh the outlook for global demand before plowing more cash into equipment that would boost productivity. Shipments of non-defense, ex-aircraft capital goods, which are used to compile quarterly gross domestic product, declined at a 9.6 percent annual rate in the first three months of the year. That was the weakest performance since the second quarter of 2009, the final months of the last recession. Economists at JPMorgan Chase & Co. lowered their tracking estimate for 1Q GDP growth to 0.3 percent from 0.4 percent after the report.

CONSUMER CONFIDENCE (APRIL)

  • Fell to 94.2 (forecast was 95.8) from 96.1
  • Six-month expectations gauge dropped to lowest since February 2014
  • Prospects for business activity deteriorated to a more than four-year low
  • Index of current conditions rose to a three-month high

The Takeaway: Americans’ moods are flagging amid dimmer prospects for further improvement in the job market and economy as election year heats up. While views on present circumstances brightened, the outlook for business conditions faltered, reaching the weakest level since October 2011. Still-cheap gas prices and a rebound in the stock market have done little to lift spirits. The funk filtered to buying plans in April as fewer consumers said they intended to buy a home in the next six months. They also said they were less committed to purchases of appliances such as washing machines and televisions.

S&P/CASE-SHILLER 20-CITY HOME-PRICE INDEX (FEBRUARY)

  • Rose 5.4 percent from February 2015 (forecast was 5.5 percent), the smallest year-over-year advance in four months
  • Increased 0.7 percent from January (forecast was 0.8 percent)
  • Half of 20 U.S. cities showed bigger monthly price gains than in January
  • Nationally, property values advanced 5.3 percent from year ago

The Takeaway: Home prices are marching higher, albeit at a more measured pace. Gradual appreciation would help broaden the housing rebound by increasing the chances of home ownership among first-time buyers and lower-income earners. And to the extent prices are still rising, they boost household wealth for those who already own a home. More-affordable houses, a strong labor market and mortgage rates close to historical lows are positives for demand heading into the housing industry’s busiest selling season of the year.

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