MAPI: Manufacturing Has Shaken Winter Blues In Durable Goods Numbers
“In a relatively positive sign for both near-term economic and manufacturing performance, the Census Bureau reported that total new orders for long-lasting durable goods rose 2.6 percent in March ,” noted Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). “Even after stripping out the volatile transportation component, new orders were up a healthy 2 percent, a considerable improvement from the 0.1 percent gain seen in February. Most likely, the end of a difficult winter eliminated weather-induced bottlenecks and orders resumed their moderate course. It is encouraging to see uniformly positive gains in key supply chain sectors such as primary metals, fabricated metals, and machinery.
“Of importance to both the manufacturing sector and the economy as a whole, business equipment spending appears to have rebounded from a difficult winter,” he added. “New orders for non-defense capital spending excluding aircraft, a proxy for business equipment demand, rose 2.2 percent in March, more than reversing a 1.1 percent decline in February. Year-over-year (year-to-date), however, this critical index is up only 1.9 percent and we have yet to see business investment break out of its unusually weak and volatile performance. Signs of more accommodative commercial and industrial credit as well as strengthening demand for commercial loans might suggest that capital spending will pick up and stabilize later this year. For now, though, it remains a laggard in the economic picture.
“All told, recent evidence suggests that manufacturing has shaken off its winter blues but is still confronting a challenging business climate,” Waldman concluded. “The U.S. economy's growth performance remains steady—though frustratingly slow—and the global environment is facing numerous regional issues, including an extended slowdown in China and deflation risk in the Eurozone. Moderate growth with a modest downside risk is the most likely path for the U.S. factory sector through the balance of 2014.”