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Tax Rules: Are Changes Helping Durable Goods Orders?

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Durable goods orders

Durable goods orders reflect new orders placed with domestic manufacturers to deliver high-value factory hard goods. The U.S. Census Bureau publishes the report. The data required to prepare the report are collated from the U.S. Census Bureau’s Manufacturers’ Shipments, Inventories, and Orders (M3) survey. The participants in the survey represent 92 different industries. More than 3,000 American manufacturers take part in the survey.

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April durable goods orders decreased 1.7%

The durable goods orders in April were reported below the market expectations. The durable goods orders decreased by $4.2 billion or 1.7% to $248.5 billion. Many analysts expected the durable goods orders to cool off in April after stellar growth in the last two months. If we exclude the volatile transportation (IYT) sector, which includes aircraft (ITA) orders, core durable goods orders increased 0.9% in April. The increase shows that the positive trend in durable goods orders is still intact. All of the major categories excluding aircraft orders reported more orders. Fabricated metal (XME) products and electrical equipment (SOXL), appliances, and components led the list.

Impact of taxes and tariffs

The only disappointment in April’s durable goods orders was the downward revision to the first-quarter data. The US GDP figures for the first quarter could be revised lower by one basis point to 2.2%. The pace of the durable goods orders is expected to increase in the second quarter as companies take advantage of the changes to tax rules. The changes allow full tax expensing of business investments rather than depreciating them over many years. Add tax cuts to corporates and US industries (XLI) will likely increase their business investments soon, which could have a positive impact on the US economy.

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