By Josh Newell

WASHINGTON (MNI) – Weak aircraft orders are expected to push down
March durables, to be released by the Commerce Department Wednesday,
reversing much of Februarys growth, but the core figures should still
post gains.

After Februarys large jump in aircraft orders, “Boeing orders were
down sharply in March. That’s what is behind the headline expectations
and that’s what drives most of the noise,” Credit Suisse Economics
Director Jonathan Basile told MNI via phone interview.

However, he noted that “generally the number should be better in
the details within the report. The expectation is that ex-transports and
core capex goods are both up for the month.”

Avery Shenfeld, chief economist at CIBC, told MNI a similar story:
“We still have a modest growth number for the ex-transport reading;
theres some growth there but it could be swamped by the aircraft
numbers.”

In an MNI survey of economists, orders for durable goods are
forecast to have declined 2% after rising 2.4% in February.

While economists differed on the extent of the monthly change, they
generally agreed that the weakness will come in aircraft, while strength
should come from capital goods.

Michael Englund, chief economist at Action Economists, actually
forecast a slight increase in the headline figure despite offering the
same story about the aircraft numbers.

“We expect the transportation number to drop, but at the same time
we are looking for equipment numbers to provide a strong bounce. Capital
goods should be strong,” he told MNI.

Credit Suisse’s Basile expects a 1.5% decline in the headline but
agrees capital goods will be a strong point: “There is an odd pattern in
core capex where it is weak in the beginning of the quarter and stronger
at the end of the quarter. No reason to bet against this trend right
now.”

CIBC’s Shenfeld forecast an even larger drop for the headline
number, at 2.5%, yet he too says “we are getting growth in business
confidence that shows in higher capital goods spending.”

Much of the other manufacturing data for March supports this idea
of growth in the core durables number.

The ISM manufacturing index rose to 53.4 in March, remaining above
the key level of 50, indicating growth for the month, while the New
Orders Index fell slightly to 54.5.

Meanwhile, the headline number in the New York’s Fed’s Empire State
Manufacturing survey for March was unchanged, remaining positive at
20.2, and the Philadelphia Fed’s manufacturing index rose 2.3 points to
12.5, also suggesting growth in the large manufacturing region.

The March Durable Goods Report will be released Wednesday at 8:30
a.m ET by the Department of Commerce.

— Josh Newell is a Washington reporter for Need to Know News

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MAUDS$]