Orders for durable goods bounced back in March despite interest rate hikes and supply shocks from geopolitical conflict. The top-line durable goods orders increased by 0.8% in the month following February’s upwardly revised figure of a 1.7% decline, according to a report from the U.S. Census Bureau on Tuesday.

March’s increase was helped by gains in vehicle orders and core capital orders that exclude defense and transportation. The increases came as domestic producers have been investing more in productivity-enhanced equipment to combat labor shortages and supply chain disruptions.

Orders for nondefense capital goods excluding aircraft rose by 1% on the back of orders for vehicles and parts, which increased by 5%, and electrical equipment, which rose by 3.9%.

Shipments of capital goods dropped by 0.3% on the month, while the core version that strips out defense and aircraft components grew by 0.2%.

On a quarterly basis, core capital goods shipments—which will feed into the investment component of the gross domestic product calculation for the first quarter—rose by 3.7% following a 2% increase in the prior quarter. That suggests a solid pace of investment growth in the first quarter.

With orders continuing to outpace shipments, inventories of durable goods remained low, growing by 0.7% on the month. Inventories of core capital goods grew by 1.0%, the lowest since September.

Unfilled order growth showed signs of easing yet remained positive, rising by 0.4% in March compared to 0.5% previously. The inventory-to-shipment ratio inched down to 1.76 from 1.77 in February.

The takeaway

Solid business investment growth is a testament to the resilience of American businesses that continue to bounce back from the shock of the pandemic. We should expect durable goods orders to moderate, however, as monetary policy is tightened and as long-term growth eases to more normal levels.