Things are looking up for orders on long-lasting manufactured goods. This morning, the AP reported that orders to U.S. factories for long-lasting manufactured goods rose in February by the largest amount in three months, helped by solid gains in demand for airplanes and autos.
The reported says that orders for durable goods increased 2.2 percent last month following a 1.3 percent drop in January as reported by the Commerce Department. The February rebound was led by a 13.6 percent surge in orders for commercial aircraft. Orders for motor vehicles and parts rose 3.6 percent, recovering from a January decline.
Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI) notes, “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 according to Meckstroth. “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 were virtually flat, up only 0.1 percent,” he added.
The durable goods report is part of a set of industrial and business indicators that show mixed results in early 2014. MAPI believes 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,” Meckstroth concluded.
Next week the Institute for Supply Management will release its monthly Report On Business. After two months of production slowdowns due to extreme winter weather, analysts will be watching to see if March’s slightly warmer climate got things back on track.
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