Dropped Order Projections: "Steep Drop in Aircraft Purchase Agreements"
U.S. Durable Goods Orders Plummet in April
The U.S. industry's new business saw a notable decline in April, with orders for goods such as aircraft, electronic equipment, and construction machinery dropping by 6.3 percent compared to the previous month, according to the Commerce Department. Economists had forecast an even steeper drop of 7.8 percent, following a revised increase of 7.6 percent in March.
The significant reduction in aircraft orders, potentially attributed to ongoing trade disputes, accounted for the substantial fall. Helaba expert Ralf Umlauf elucidated, "The prominent decrease in aircraft orders is mainly responsible for the large drop." He further noted that without the volatile transportation sector, there would have been a minimal increase of 0.2 percent.
Uncertainty about U.S. trade policy has escalated, and the Federal Reserve exhibits no urgency in considering interest rate cuts, as per Umlauf. Despite pressure from President Donald Trump, Federal Reserve official Neel Kashkari advocated patience in lowering interest rates. Kashkari, the head of the Minneapolis Federal Reserve Bank, emphasized maintaining interest rates until obtaining more clarity on the impact of Trump's trade policies. Since December, the Federal Reserve has held its benchmark interest rate constant in the range of 4.25 to 4.50 percent.
The ongoing U.S. trade disputes affecting aircraft orders are influenced by various factors, including tariffs, legal complexities, and ongoing negotiations with the EU concerning state subsidies to aerospace giants. These factors contribute to uncertainty and potential cost increases for both manufacturers and buyers. The evolving legal landscape necessitates close attention to contractual provisions like price escalation and force majeure clauses.
Source: ntv.de, RTS
- The decline in U.S. durable goods orders can be partially attributed to the employment policy of the aerospace industry, which has been affected by ongoing trade disputes, tariffs, and legal complexities.
- The finance industry should closely monitor employment policies within sectors such as aircraft manufacturing, as the evolving legal landscape surrounding trade disputes and state subsidies can impact both manufacturers and buyers, potentially leading to increased costs and contractual uncertainties.
