February Report on Shipments, Orders Brings Sweet, Sour News

By March 31, 2010Economy, General

Today’s Commerce Department report on manufacturing shipments, inventories and orders in February offered mixed news for manufacturers, economic growth and job creation.Manufacturing shipments fell in February after a sharp slowdown in January, signaling that the strong pace of economic growth in the fourth quarter of 2009 will not be repeated in the early part of this year and appear to have been fueled by temporary factors such as inventory restocking and expiring tax provisions. It is likely that severe winter weather conditions played some role in the weak February numbers, especially in construction-related sectors such as construction machinery, wood and textile products and nonmetallic mineral products such as bricks, glass and cement and concrete.

On a positive note, orders for durable goods – which are a good indicator of future industrial activity – were revised upward to 0.9 percent, indicating that manufacturing activity is on the upswing and should continue on this path in the coming months. The increase was mainly driven by a sharp upward revision in new orders for core nondefense capital goods. Since many of these products are exported, today’s report underscores that continued export growth will be critical to a sustainable manufacturing recovery.

Looking ahead, a weak labor market and lower consumer and business confidence will
likely constrain the pace of the economy and domestic-oriented manufacturing sectors for the next several quarters.

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