Create a free Manufacturing.net account to continue

MAPI: Despite Some Drops, Durable Goods To Grow Soon

The growth in April’s new orders was entirely due to large defense contracts which have very long lead times and thus do not reflect activity that is likely this year. Having said that, defense capital goods contracting has exploded in early 2014.

Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), has weighed in with some thoughts on the April durable goods numbers, which were released this morning:

“The U.S. Bureau of the Census reports that durable goods orders increased 0.8 percent in April 2014, following strong growth in both March and February. The growth in April’s new orders was entirely due to large defense contracts which have very long lead times and thus do not reflect activity that is likely this year. Having said that, defense capital goods contracting has exploded in early 2014, following the Federal budget agreement, up 21.7 percent this year versus last. Excluding defense, new orders fell 0.8 percent in April.

“The most reliable measure of business equipment order activity is nondefense capital goods orders excluding aircraft. The measure fell 1.2 percent in April, but this follows extraordinarily strong 4.7 percent growth in March. Year-to-date nondefense capital goods orders excluding aircraft is up 3.1 percent—a modest pace of growth.

“Business equipment order activity should pick up in the coming months. The weather has returned to normal and much of the Federal budget uncertainty has dissipated. Corporate profits are growing, firms are sitting on lots of cash, plus banks are easing lending conditions. MAPI expects manufacturers to lead the acceleration in capital goods because capacity utilization is relative high in manufacturing and the supply chains for energy, housing, and transportation are rapidly reviving.”

More in Supply Chain