By Jeffry Bartash, MarketWatch
The numbers: Orders for durable or long-lasting goods tumbled in April because of falling demand for Boeing jets and new cars and trucks, but even more worrisome, business investment continued to weaken in the face of a tense trade standoff with China and a slower U.S. economy.
Orders for durable goods — products meant to last at least three years — dropped 2.1% in April, the government said Friday . The increase in orders in March was also marked down.
Economists surveyed by MarketWatch had forecast a 2.4% decline in new orders.
If cars and planes are stripped out, orders were flat. Transportation often exaggerates the ups and downs in orders because of lumpy demand from one month to the next.
What happened: The big drop in orders last month was mostly tied to a drop-off in bookings for Boeing /zigman2/quotes/208579720/composite BA +0.22% jetliners. The giant manufacturer took in just four orders in April following the worldwide suspension of flights for its 737 MAX planes after a pair of deadly crashes.
Yet a key measure of business investment known as core capital-goods orders also declined. Investment fell 0.9% — the first tumble in four months. These orders strip out aircraft and defense spending to get a better idea of how much the private sector is investing.
The yearly pace of business investment slowed in April to 1.3% from 3.8%, marking the smallest 12-month increase since the final month of Barack Obama’s presidency in January 2017.
The originally reported 2.6% increase in durable-goods orders in March was slashed to 1.7%.
Big picture: The manufacturing side of the U.S. economy began to slacken toward the end of last year, a slowdown exacerbated by the trade war with China. A still-weak global economy is another drag.
Businesses are unlikely to sharply ratchet up spending and investment until the U.S.-China spat is resolved and the global economy strengthens.
The good news is, manufacturers are still expanding, even if at a snail’s pace, and most are unwilling to reduce their workforces amid a widespread shortage of skilled labor. So long as the vast majority of Americans keep working and mass layoffs are avoided the economy is unlikely to stumble.
Market reaction: “This is an April report. The trade war accelerated in May. There is almost certainly more weakness coming,” said chief economist Chris Low of FTN Financial. He and most economists predict gross domestic product will taper off in the second quarter.
Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.27% and S&P 500 /zigman2/quotes/210599714/realtime SPX -0.10% rose in Friday trades after a big drop on Thursday. Wall Street has taken a beating in the past week over worries that the U.S.-China impasse could drag on for months and harm the economy.
The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y -1.99% slipped to 2.33%. The yield has sunk from a seven-year high of 3.23% last October, reflecting a softer U.S. economy and ongoing trade tensions.