Durable goods orders dropped 1.6%, mainly on a 31.1% drop in aircraft orders. Many buyers canceled orders and shipments of the 737 Max until a fix to the plane’s navigation system could be found. Orders for motor vehicles and parts were also down slightly. Fleet sales for vehicles have been even weaker than overall retail sales in recent months.

Core capital goods orders, which more closely track business spending plans, fell a modest 0.1% following modest downward revisions to the previous two months. Weakness was greatest in communications equipment, which posted a temporary gain in January.

Separately, defense orders continued to fall in February despite the boost to defense spending in the fiscal years 2018 and 2019 budgets. Some of that weakness was likely due to delays from the government shutdown and will be recouped in the second quarter.

Core shipments, which tracked actual investment during the first quarter, flattened in February and rose only moderately from the fourth quarter. That was a disappointment, as business investment was one of the bright spots in the fourth quarter.

Bottom Line

The data on the first quarter remain weak. More recent surveys of manufacturing suggest that we may have turned a corner in March. Disruptions to the supply chain in the manufacturing sector would rapidly idle plants in the U.S. and Canada; a border closing with Mexico would rapidly undermine hopes for a rebound in growth for the second quarter.