Marketplace®

Daily business news and economic stories

Orders for durable goods like airplanes and appliances declined in April

One reason for the decline is that companies stockpiled goods in March trying to get ahead of tariffs, and are now pulling back. But it also could signal tough times ahead for the U.S. economy.

Download
Large household appliances, like washing machines, make up part of durable goods orders. Many retailers stocked up a few months ago to avoid potential tariffs.
Large household appliances, like washing machines, make up part of durable goods orders. Many retailers stocked up a few months ago to avoid potential tariffs.
Joe Raedle/Getty Images

"More and more signs of the trade war showing up the “hard data” — take the Commerce Department’s latest report on orders for durable goods. It showed the biggest drop in six months, down 6.3% in April, following a big jump in orders back in March.

The April decline in orders for “durable goods” — things meant to last three years or more, like cars, planes and equipment — may have been large, but it wasn’t surprising to Holly Wade, executive director of the research center at the National Federation of Independent Business.

“We had a huge surge the prior month, and so this kind of recalibrated what we've seen as a pattern previous to these last two months,” she said.

Lots of companies stockpiled goods trying to get ahead of tariffs, so are pulling back now. Plus, countries and businesses put a hold on some big orders after “Liberation Day.”

Boeing, of course, is a major manufacturer. It's a major producer in the U.S. and job creator, and it is in some ways square in the middle of trade war.

Just a few cancelled orders from China for jumbo jets can really swing the numbers, said Alex Jacquez, chief of policy and advocacy at economic think tank Groundwork Collaborative.

But there is another measure in this report Jaquez said to watch: a metric known as core capital goods orders.

“It's a less volatile proxy for investment and equipment, excludes aircraft and military hardware, generally,” he said.

That was down 1.3%.

The decrease in core capital goods orders represents businesses buying fewer machines and equipment they need to make other things, said Patrick Horan, a research fellow at the Mercatus Center.

“Investment tends to lead the rest of the economy,” he said.

And when that kind of investment slows down, Horan said other parts of the economy, including consumption, tend to slow down a bit later.

“So this … suggests that the economy is going to be in for a rough period this year,” he said.

Especially if the uncertainty around tariffs continues.

Related Topics