U.S. durable goods orders disappointed traders this morning, dropping 0.6%. Consensus expectations was for a 0.5% increase in March over February.

March’s orders do not include semiconductors because the chipmakers wouldn’t supply numbers.


RBC Financial notes that telecommunications equipment, vehicles, and computer hardware led the decline as non-defence capital goods orders fell by -2.8%. “Though orders for industrial products have likely bottomed out, there isn’t much evidence of a sustained and significant rise in new orders across a reasonably broad set of industries. Past months’ releases showed increasing orders, but mostly in defence and transportation related orders. This report confirms Federal Reserve chairman Alan Greenspan’s cautious observations on the outlook for business investment amidst evidence of large amounts of excess capacity.”

BMO Nesbitt Burns read the report, “as another sign that there is not overwhelmingly strong momentum in the American economy. This report represents a further confirmation that Chairman Greenspan’s cautious “show me” view about sustaining the recovery beyond the obviously strong first-quarter results is prudent.”

“The poor results do not suggest a mirror image performance for Canada’s manufacturing sector,” insists BMO. “Canadian companies have a hefty cost advantage, based partly on the overvalued U.S. dollar, and have been outperforming their U.S. counterparts substantially for months. We continue to think that Canadian basic industry’s outperformance represents a solid investment theme.”

RBC notes that U.S. new home sales were sharply revised upward for February to 906,000 units from 875,000, but this slipped back by -3.1% in March to 878,000 units. “Markets seem to be focusing upon the decline in isolation of the revision to last month’s numbers. Volumes are still high and a strong housing market is still supporting the overall economy, but further moderation is expected in coming months as mortgage rates drift upward, pent-up demand becomes exhausted and abnormal seasonal influences disappear.”

“Views on the strength of U.S. manufacturing should remain cautious until the issue of the overvalued dollar is finally resolved,” says BMO.