Broad-Based Gains in Orders Outside Aircraft Are a Positive Sign

By April 23, 2010General

Today the Commerce Department reported that manufacturing durable goods orders fell 1.3 percent in March. Even though the headline report of falling durable goods orders was in the red for the first time in four months, the underlying detail was nearly a sea of green. The drop in orders was entirely due to the volatile transportation sector, where nondefense aircraft orders fell sharply last month after huge gains in prior months.

Outside of transportation, new orders surged 2.8 percent last month, the fastest gain since December 2007 and the fourth increase in the past six months. Given the fact that machinery, computers and electronics and primary metals are among the most export-dependent industries, the strong gains in new orders last month posted by these industries is a welcomed sign that exports are continuing to lead the U.S. economy out of recession.

However, some of the increase in activity, such as electrical appliances and equipment, could have been lifted by the home-buyer tax credit which expires this month. The result could be a temporary slowdown in housing-related industries later in the second quarter.

 

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