New orders for key U.S.-made capital goods tumbled in April and shipments declined, bolstering expectations that the novel coronavirus crisis will lead to the deepest economic contraction in the second quarter since the Great Depression.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 5.8% last month, the Commerce Department said on Thursday. Data for March was revised sharply down to show these so-called core capital goods orders falling 1.1% instead of dipping 0.1% as previously reported.
Economists polled by Reuters had forecast core capital goods orders diving 10.0% in April. Core capital goods orders dropped 1.3% on a year-on-year basis in April.
Shipments of core capital goods dropped 5.4% last month. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement. Core capital goods shipments fell 1.2% in March.
Last month's drop in core capital goods orders and shipments suggested business investment decreased further early in the second quarter after four straight quarterly declines. It came on the heels of record drops in retail sales and production at the nation's industries in April after drastic measures to slow the spread of COVID-19.
Economists are estimating gross domestic product plunged at as much as a 40% annualized rate in the second quarter, which would the largest slump in output since the government started tracking quarterly GDP in 1947.
The economy contracted at a 5.0% pace in the first quarter, the sharpest since the 2007-09 Great Recession.
But the bottom in core capital goods orders is likely near, with regional Federal Reserve factory surveys falling in May, but at lesser steeper rates as the economy reopens.
Orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, plunged 17.2% in April after dropping 16.6% in March.
Demand for transportation equipment collapsed by 47.3%. Boeing reported no orders in April, according to information posted on its website, and has experienced cancellations.
Orders for motor vehicles and parts dived 52.8% last month.