Market Wire - Durable Goods Rise More Slowly, Underlining Slowing Momentum in US Economy

Karl Schamotta, Chief Market Strategist: karl.schamotta@corpay.com

Durable goods orders and capital investment climbed less than expected last month, suggesting that shifting spending patterns and dwindling savings are beginning to take a toll on tangible consumption patterns in the US economy. Data released by the Census Bureau this morning indicated that new orders for manufactured goods meant to last more than three years increased $1.2 billion or 0.4 percent to $265.3 billion in April. Markets expected a 0.6 percent gain. 

Shipments increased $0.3 billion or 0.1 percent to $264.3 billion, and unfilled orders rose for a 20th consecutive month, up $5.9 billion or 0.5 percent to $1,106.7 billion. 

Core capital goods orders - a measure of non-defence capital goods excluding aircraft - rose 0.3 percent month-over-month after a revised 1.1 percent gain in March. Economists polled by the major data providers had expected a 0.5 percent increase.

Treasury yields dropped in the minutes after the release, putting downward pressure on the dollar. Markets are treading carefully ahead of this afternoon’s Fed minutes, with incipient signs of US economic weakness putting investors on alert for any softening in the central bank’s hawkish rhetoric. Expectations for a 50 basis point move at the Fed’s September meeting have tumbled, and terminal rate forecasts are coming down, with swaps now showing rates peaking at around 2.95 percent next year - down from 3.1 percent earlier in the week. 

The euro is back on the defensive after a number of senior European Central Bank officials warned against hiking rates aggressively in the coming months, suggesting that growing economic uncertainties would make a gradual tightening cycle more appropriate.