February Durable Goods See Modest Rebound, Analysts Weary

The Commerce Dept.’s durable goods report shows a modest increase in February, but some worry it is more market volatility than true rebound.

The Commerce Dept. on Wednesday released its February durable goods report which indicated a modest rise for the month.

After dropping 9.3 percent for January, new orders increased 2.5 percent in February to $206.9 billion, marking the third increase in the past four months.

Shipments continued to decline, down 0.8 percent to $207.3 billion, following a 1.5 percent decrease in January.

Unfilled orders, which had increased 21 of the past 22 months, was up 0.9 percent to $702 billion—its highest level since 1992.

Inventories continued a 12-month trend and increased 0.2 percent to $298 billion.

Nondefense new orders for capital goods rose 9.5 percent to $70.7 billion. Defense new orders also increased, rising 3.5 percent to $8.4 billion.

“Durable goods orders rose 2.5 in February, which actually is a deceptively sluggish pace,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI.  “Durable goods order declined 9.3 percent in January, so the February bounce back was far from complete.  More importantly, the gains in February’s orders were concentrated in defense and aerospace—notoriously volatile sectors.  Non-defense capital goods orders excluding aircraft, a key indicator of equipment spending in the GDP accounts, declined 1.2 percent in February after falling 7.4 percent in the first month of the year.

“It is still too early to tell if the equipment spending slowdown is merely weather-related or a real shift toward risk avoidance by businesses amid the uncertainty surrounding the housing decline and mortgage credit problems,” he added.

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