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Aircraft Nosedive Durable Goods

By Dirk van Dijk, CFA of

NEW YORK ( TheStreet) -- Non-defense aircraft was the reason for the drop in new orders for durable goods, which fell by 1.3% in March, well below expectations for an increase of 0.1%.

Offsetting this were positive revisions to February, where new durable goods orders are now estimated to have risen by 1.1% instead of the original estimate of 0.9%. If transportation equipment orders are excluded, then new orders rose by 2.8%, far above the 0.7% expected rate. Orders for goods other than Transportation were also revised up sharply for February, to an increase of 1.7% from 1.4%.

So orders for non-defense aircraft are quite volatile. As Johnny Carson might have asked, "How volatile ARE they?" In March they were down 67.1%, which sort of makes it sound like Boeing (BA) is going out of business, until you consider that in February non-defense aircraft orders rose by 32.7% and in January they shot up by 134.9%. These are month to month changes that can give any analyst airsickness.

Year-to-date, non-defense aircraft orders are running 71.6% above the levels of a year ago, so no, Boeing, and makers of smaller aircraft like Textron (TXT) are not hurting overly much -- it is just that the orders tend to be very lumpy from month to month. Aircraft are also very expensive, so a few more or fewer 787s ordered this month can have a very big impact on overall orders.

Aerospace firms also tend to get a fair amount of work from the Pentagon, and orders from Defense aircraft rose 2.0% after a 20.6% plunge in February, which reversed a 17.3% rise in January. Year-to-date, orders are up 21.4%.

In other words, if you want to filter out the noise, focus on the numbers excluding Transportation orders, or at least look at a longer time-frame than just a month in looking at Transportation orders.

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