NCPA - National Center for Policy Analysis

As Durable-Goods Orders Fall So Does the GDP

March 27, 2015

Many forecasters estimate the economy downshifted in the first three months of this year in a milder version of last year's disappointing start.

The latest factor pushing down expectations was a drop in business spending and investment.

  • According to the Commerce Department, orders for durable goods declined a seasonally adjusted 1.4 percent in February from a month earlier. Excluding the volatile transportation sector, orders fell 0.4 percent, the fifth consecutive monthly decline.
  • Orders for nondefense capital goods excluding aircraft dropped 1.4 percent from January. That marked the sixth straight monthly decline, which may have been due to lower oil prices hitting demand for oil equipment.
  • U.S. retail sales fell 0.6 percent in February, the third consecutive monthly decline.

The weak performance suggests U.S. companies remain cautious about spending amid weak global demand and a strengthening dollar. Severe winter weather has also likely played a role in recent economic softness, as homebuilders pulled back on new construction and consumers spent less at retailers and restaurants.

  • The Federal Reserve Bank of Atlanta on Wednesday put its gauge at an annualized 0.2 Percent, down from its earlier estimate of 0.3 percent.
  • Morgan Stanley economists lowered their estimate for first-quarter growth to an annualized 0.9 percent from an earlier forecast of 1.2 percent, pointing to light inventories and lower exports as weighing on GDP.
  • Barclays economists lowered their projection a tenth of a percentage point to 1.2 percent.
  • The forecasting firm Macroeconomic Advisers trimmed its estimate down to 1.2 percent from 1.5 percent.
  • J.P. Morgan Chase economists lowered their first-quarter forecast to an annualized 1.5 percent, from 2 percent.

Economists do not expect as big of a slump in output in the first quarter as in 2014, in part because the underlying health of the economy is better than it was a year ago. The fundamentals are stronger than they were last year.

Source: Kate Davidson, "Durable-Goods Orders Fall, Raising Worries Over GDP Growth," Wall Street Journal, March 25, 2015.


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