Rise (and fall) of the machines

The recent weakness in durable goods orders and shipments is not due to a mining-related slump triggered by the collapse in oil prices. Instead, it is principally due to a drop back in industrial machinery orders and shipments, which follows what was a massive, but unsustainable, surge last summer. The weakness of overseas demand and the stronger dollar may have played a role in this, with capital goods exports down sharply in recent months. Regardless of the explanation, the latest survey evidence points to a rapid recovery in machinery shipments soon. Accordingly, while there is a good chance that equipment investment contracted in the first quarter, that should be followed by a rebound in the second quarter.