📊 Durable Goods Orders

To: Institutional Clients

From: Economics Strategy Group

Date: March 2026

Subject: Durable Goods Analysis – Core Capex Resilience Amid Headline Volatility

1. Executive Summary

The latest Durable Goods data reveals a divergence between headline volatility and underlying business investment. While headline New Orders experienced a modest monthly contraction in February 2026, the Core Capex (ex-aircraft) component continues to exhibit a steady, disciplined climb. This suggests that while broad-based demand may be fluctuating, the strategic investment in productivity-enhancing equipment remains robust.

Overall, the data signals a resilient private sector that is continuing to invest in capacity despite a restrictive interest rate environment. The stability of core orders mitigates concerns of a sudden cyclical downturn in manufacturing, providing a supportive backdrop for a "soft landing" scenario.

2. Five Main Views

• Headline Softness is Transitory: Durable Goods New Orders fell 1.28% MoM in February 2026 (from \$319.98bn to \$315.88bn), yet remain significantly elevated on a YoY basis, posting a strong gain of 7.44% over February 2025.
• Core Capex as the Primary Signal: Core Capex Orders (ex-aircraft) provide a cleaner signal of business confidence, rising 0.69% MoM to \$79.53bn, maintaining a consistent upward trend throughout the trailing 12 months.
• Sustained Investment Momentum: On a YoY basis, Core Capex has grown by 5.25% (from \$75.56bn in Feb '25 to \$79.53bn in Feb '26), indicating that corporate investment is not yet being deterred by the cost of capital.
• Reduced Volatility in Core Metrics: Unlike headline orders, which saw swings as high as 15% in early 2025, Core Capex has avoided any monthly declines since June 2025, reflecting a stabilized procurement cycle.
• Divergence in Order Books: The gap between the headline dip and the core rise suggests that the February weakness was driven by volatile sectors (likely transport or defense) rather than a broad retreat in industrial demand.

3. Macro Characterization

(i) Growth: The data points to a steady, if unspectacular, growth trajectory. The consistent expansion of Core Capex suggests that the "investment" component of GDP remains a reliable engine of growth, offsetting the volatility seen in broader durable goods.

(ii) Labor Market: Durable goods orders serve as a leading indicator for manufacturing employment. The sustained growth in non-aircraft capital equipment suggests that firms are continuing to invest in capacity and automation, which should support stable labor demand in the industrial sector.

(iii) Inflation: The persistent demand for capital goods suggests that pricing power in the B2B sector remains intact. While not an immediate inflationary shock, the steady climb in core orders indicates that demand for industrial inputs is not collapsing, which may keep "sticky" core inflation elevated.

4. Policy Outlook

Based on the resilience of Core Capex and the strong YoY headline growth (+7.44%), there is no evidence of an imminent economic cliff that would necessitate aggressive Fed easing. The data suggests the economy can withstand current restrictive levels for longer.

Forecast: We expect the Federal Reserve to maintain a "Hold" stance at the next meeting. The balance of risks remains tilted toward inflation persistence rather than growth collapse, as business investment shows no signs of buckling. We anticipate the first measured rate cut will be delayed until a clear deceleration in core investment is observed or inflation targets are more firmly secured.