The widespread grounding of the Boeing 737-MAX aircraft means that durable goods orders will likely be under added pressure the next few months, explained analysts at Wells Fargo. They also noted that the pause on deliveries also represents a near-term risk to equipment spending.
Key Quotes:
“Whether from the Defense Department or from private airlines, aircraft orders are usually a big swing factor in overall durable goods orders.”
“The groundings apply only to the 737-MAX, the most recent generation of the world’s best-selling aircraft. Since the first shipment in May 2017, Boeing has delivered just 376 of the aircraft in question, though the total number of orders booked is just over 5,000, the earliest of which were recorded as far back as 2011. If some of those orders were to be canceled, the Commerce Department would subtract them from the headline figure in the month in which they occur for the durable goods report, according to notes in the report release and our discussions with Commerce Department staff.”
“Considering the 737-MAX aircraft comprises almost half of Boeing’s orders in the past few years the total negative impact to durables could be substantial if airlines hold off on new 737-MAX orders the next few months.”
“Orders still came in during the grounding period and the Dreamliner has subsequently seen steady sales volume. Also reminiscent of that period, Boeing said they will continue to build the 737-MAX while it resolves the issue, which will likely prevent any major disruption to supply chains. Suspended deliveries, on the other hand, could weigh on capex spending as early as the current quarter.“
“The 737-MAX aircraft averaged roughly 40% of aircraft deliveries in the past three months. With fewer aircraft being shipped until the issue is resolved, we see some risk to our near-term outlook for equipment spending.”
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