US Conference Board’s consumer confidence fell back in March, almost entirely reversing the previous month’s rebound. The Conference Board’s consumer confidence indicator dropped from 68.0 to 59.7, while only a slight decline was expected. The breakdown shows that consumers were especially more worried about their expectations (60.9 from 72.4), while the current assessment sub-index weakened only moderately, from 61.4 to 57.9. The labour market index, on the contrary, stayed unchanged at -26.8 in March as labour market conditions remained favourable. Apparently the continued uncertainty on the fiscal situation in the US and sequestration weighed on consumer sentiment. We expect that the impact will gradually ease in the coming months, as the labour market continues to improve, while also housing market conditions remain favourable.
US durable goods orders showed a remarkable rebound in February. Durable goods orders increased by 5.7% M/M, while the previous figure was upwardly revised from -5.2% M/M to -3.8% M/M. The breakdown shows that the strength was based in transportation orders (21.7% M/M) led by a 95.3% M/M surge in orders for nondefense aircraft, while orders for vehicles and parts increased by 3.8% M/M. Excluding the volatile transportation component, US durable goods orders dropped by 0.5% M/M, while an increase by 0.6% M/M was expected. Within the core reading, orders for machinery (-2.2% M/M) and fabricated metals (-4.4% M/M) fell in February, while a rebound was seen in orders for electrical equipment (2.9% M/M), primary metals (1.7% M/M) and computers & electronics (1.3% M/M). It was however only the first time in six months that orders excluding transportation dropped in February. Shipments of non-defense capital goods excluding aircraft rebounded by 1.9% M/M, after falling by 0.7% M/M in January. Recently, US durable goods orders have been very volatile, mainly due to big swings in aircraft orders. While the headline figure looks impressive, the underlying data are less so but, after months of strong order data, this mixed report is no reason for concern for now as it could be a temporary payback, maybe related to the sequestration.
After a strong rebound in February, the Richmond Fed manufacturing index lost some ground in March. The headline index dropped from 6 to 3, while a stabilization at 6 was expected. The drop reverses however only a small part of the 18-point rebound posted in February. The weakening is confirmed by the details with new orders (-4 from 0), capacity utilization (-3 from 11) and vendor lead time (-2 from 0) falling back into contraction, while growth shipments (8 from 10) and wages (4 from 11) eased. Order backlogs contracted at a steeper rate (-14 from -12), while a slight pick-up was registered in number of employees (9 from 8) and a more significant one in average workweek (10 from -2). Recently, the Richmond Fed manufacturing index has been volatile, probably due to uncertainty on the fiscal situation in the US. Overall activity in the US manufacturing sector remained on track for now, although business confidence indicators suggest that underlying sentiment remains fragile.