New orders of durable goods rebounded from April to May, after suffering some ugly declines in March and April. While the monthly improvement is good news, durable goods orders are still well below pre-pandemic levels.
New orders rose by 15.8% from April to May, the Census Bureau announced on Thursday. In comparison, orders fell by 17% in March and 18% in April. Similar to other metrics we have seen this week, it isn’t bad, but isn’t great either. The Commerce Department announced an 18% monthly gain in retail sales, and IHS Markit’s manufacturing index registered at 49.6, only a small contraction. A positive, but tenuous gain for manufacturing.
Transportation equipment gains led the recovery. Orders for cars and airplanes rose by 80.7%. Auto orders alone fell by roughly two-thirds in March and April, but improved 27.5% monthly in May. Boeing reported fewer cancellations, but no new orders last month. Overall, transportation orders jumped from $22.1 billion in April to $28.2 billion in May. In comparison, orders were worth $47.8 billion in March. That these markers are improving could signal an end to the current recession. However, it speaks to the depth of our economic decline that we could see large gains and still be below pre-Covid levels of economic activity. Suffice it to say, the road to recovery is going to be long.
Stripping out cars and airplanes, durable goods orders only expanded by 4% since April. Core orders, which exclude defense and transportation spending, grew by 2.3%.
Prospects aren’t great for any meaningful economic recovery this year. Thus far, the World Bank, the International Monetary Fund, and the Congressional Budget Office have each forecasted considerable decline in 2020. Even without a second wave of the coronavirus, which now appears to be coming to fruition, 2020 is shaping up to be a bust.