U.S. Durable Goods Orders Surged 7.9% in April, Indicating Robust Business Activity

New orders for durable goods in the U.S. surged by 7.9% in April, significantly surpassing the consensus expectation of a 4.0% rise. Including revisions to prior months, the increase was an even more robust 8.5%. This strong performance points to a healthy expansion in business activity, with overall orders up 17.2% from a year ago.

Excluding the often-volatile transportation sector, orders still rose by 1.1% in April, beating the anticipated 0.4% gain. With revisions, this figure climbs to 1.4%. Orders excluding transportation have seen a substantial 9.1% increase over the past year, indicating broad-based strength beyond major aircraft and vehicle purchases.

The increase in April's durable goods orders was primarily fueled by demand for commercial aircraft, fabricated metal products, and primary metals. Several key categories, including primary metals, fabricated metal products, industrial machinery, and computers & electronic products, have experienced double-digit growth year-over-year. This sustained demand is leading to increased backlogs, with unfilled orders rising 1.7% in April and 11.5% over the last twelve months, marking the fastest pace in more than four years.

Business investment, as measured for GDP calculations, focuses on shipments of non-defense capital goods excluding aircraft. This crucial metric saw a 0.4% increase in April. Should these core shipments remain unchanged in May and June, they would contribute to a 6.8% annualized growth rate in the second quarter compared to the first quarter average. This indicates continued strength in business investment, a trend that has been observed since mid-2025, potentially driven by a more favorable tax environment and growing expenditures on artificial intelligence.

Regional manufacturing sentiment, however, presented a mixed picture. The Philadelphia Fed Manufacturing Index, which gauges factory activity in that region, declined to -0.4 in May from 26.7 in April. Similarly, the Kansas City Fed Manufacturing Index slipped slightly to 8 in May from 10 in April. In contrast, the Richmond Fed index, reflecting manufacturing activity in the mid-Atlantic, jumped significantly to 13 in May from 3 in April.

Key terms

1. **Durable Goods:** Products designed to last for three years or more, such as appliances, cars, and machinery. They are often a key indicator of consumer and business confidence.

2. **Capital Goods:** Long-lasting goods used by businesses to produce other goods or services, like industrial machinery or computer equipment. Their orders and shipments are a proxy for business investment.

3. **Unfilled Orders:** The total value of orders received by manufacturers that have not yet been completed or shipped. An increase suggests strong demand and future production activity.