Business spending in April was stronger than what economists had forecast.
According to the Census, nondefense capital goods orders excluding aircraft jumped by 1.0%. Economists had expected this metric — informally known as core capex — to increase by just 0.3%.
Core capex is another way saying business investment, and it’s a reliable proxy for economic activity in general.
Total durable goods orders, which includes the volatile aircraft orders, fell by 0.5%. This was right in line with expectations.
“April’s durable goods figures confirm that, following the earlier disruption caused by the unseasonably cold weather in the Northeast and the West Coast port dispute, the factory sector was getting back on track as spring approached,” Capital Economics’ Paul Ashworth said. “The upshot is that the anticipated pick-up in the growth rate of business investment in equipment in the second quarter appears to be firmly on track.”
This is good news as much of the recent economic data has reflected a pretty significant economic slowdown in Q1 spilling into Q2.
Then again, this is just one report.
“Despite the positive tone of this report, there is still a long way before we can get the necessary confirmation that the overall economic recovery is truly on track,” TD Securities’ Millan Mulraine said.