Non defense capital goods orders ex aircraft in March fell .4% m/o/m, 3 tenths worse than expected and also of note, February was revised down by 6 tenths. Shipments too were weaker than forecasted and February was also revised down which means we’ll see a clip to Q2 GDP as this is directly plugged in. A huge jump in volatile airline orders helped the headline print.
Orders for auto’s/parts fell .1% after a 1% drop in February as inventories on dealer lots continue to normalize (in the new normal of days of inventory). Orders for computers/electronics bounced 1.9% m/o/m and were up by .8% for electrical equipment. Orders for machinery and metals were little changed m/o/m.
Bottom line, there is a simple pass through between cash flow and capital spending as you need the former in order to fund the latter. As we’re in an earnings recession and cash flows are slipping it makes sense that companies husband cash. I mentioned this morning what Google said in its earnings call that cap ex would be up “modestly higher.” This for a company that can afford any spending it wants.
Adding a bit back to any capital spending cut to GDP estimates was the lower than expected goods trade deficit in March of $84.6b vs the estimate of $90b. After a drop in February of 3.8%, March exports rebounded by 2.9% m/o/m while imports fell for a 2nd month, by 1.1% m/o/m.
Treasury yields are little changed from right before the data release but the 2 yr yield is down another 3 bps today after the 24 bps drop in the prior two days and at 3.92% is back to a three week low. The Fed is done after next week on the rate side but will continue on with QT.
2 yr Yield
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