U.S. Durable Goods Orders Unexpectedly Drop 1.4% In February

(RTTNews) - With orders for transportation equipment showing a notable pullback, the Commerce Department released a report on Wednesday showing that new orders for U.S. manufactured durable goods unexpectedly decreased in the month of February.

The report said durable goods orders fell by 1.4 percent in February following a downwardly revised 2.0 percent increase in January.

The drop in orders came as a surprise to economists, who had expected orders to climb by 0.7 percent compared to the 2.8 percent jump that had been reported for the previous month.

Orders for transportation equipment led the way lower, tumbling by 3.5 percent in February after surging up by 8.8 percent in January.

The report showed a steep 33.1 percent drop in orders for defense aircraft and parts as well as an 8.9 percent decrease in orders for non-defense aircraft and parts.

However, the Commerce Department said durable goods orders still fell by 0.4 percent in February even when excluding transportation orders. Ex-transportation orders had been expected to rise by 0.3 percent.

The drop in ex-transportation orders was partly due to notable decreases in orders for fabricated metal products and machinery, which fell by 2.0 percent and 1.8 percent, respectively

The report also showed a 1.4 percent drop in orders for non-defense capital goods excluding aircraft, a closely watched indicator of capital spending.

Peter Boockvar, managing director at the Lindsey Group, said, "Bottom line, the softness in capital spending is more than just from the oil and gas industry and the core cap-ex component on an absolute spending level is at the lowest level since May 2014."

"I understand why the Fed is so reluctant to raise rates in the face of soft economic data, but I also know that zero rates has resulted in corporate behavior that is more interested in short term fixes to the stock price rather than long term thinking on investment," he added.

Next Thursday, the Commerce Department is scheduled to release a separate report on factory orders in the month of February. The report includes data on orders for both durable and non-durable goods.