MAPI: Durable Goods Numbers Show Some Good, Some Bad
“The Census Bureau reports that new orders for durable goods rose 2.2 percent in February after falling 1.3 percent in January and 5.3 percent in December,” noted Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). “The good news in the report was that primary metals orders were up 1.8 percent, motor vehicles and parts orders rose 3.6 percent, and both defense and nondefense orders grew at a double digit rate in February.
“Despite the seemingly good news, however, the underlying demand for business equipment actually declined,” he added. “Defense and aerospace orders are very large, and erratic, and have multiyear lead times that indicate nothing about the short-term outlook for business equipment. When taken out of the capital goods totals, nondefense capital goods orders excluding aircraft fell 1.3 percent in February after rising 0.8 percent in January and declining 1.6 percent in December. In the first two months of 2014 compared to the same period one year ago, nondefense capital goods orders excluding aircraft is virtually flat, up only 0.1 percent.
“The durable goods report is part of a set of industrial and business indicators that show mixed results in early 2014,” Meckstroth concluded. “We believe that a combination of abnormally severe weather, an inventory correction from excessive stocks built up late last year, and sluggish overall economic growth in the first quarter of 2014 are weighing on manufacturing activity. Nevertheless, growth patterns are never smooth and MAPI believes that the early weak patch is temporary and overall economic and manufacturing production of business equipment will not only grow, but grow faster in 2014 than in 2013.”