Durable Goods Continue Moderate Recovery Pace

By March 24, 2011Economy

Durable goods new orders fell 0.9 percent in February from January, according to data released by the Commerce Department today; but not too much emphasis should be put on this one-month fluctuation. Even though February seasonally-adjusted durable goods new orders were down from January, they were 2.7 percent larger than in December 2010 – an annual rate of growth of 17 percent.  Durable goods include a lot of big-ticket items ordered long in advance, and are subject to significant month-to-month fluctuation.

Illustrating some of the large fluctuations, the year-to-date (January-February, compared to January-February 2010) new orders data showed primary metals up 23 percent, machinery up 20 percent, communications equipment down 17 percent, and defense aircraft down 19 percent.  

In general, though, both new orders and factory shipments over the past few months are consistent with the moderate manufacturing recovery that has been taking place since mid-2009, as is visible in the graph below.  The recovery currently implies a 6 to 8 percent annual rate of growth, and the February data doesn’t indicate a change in that pattern.  Indeed, January-February durable goods new orders are 7.6 percent larger than January-February 2010. 

Frank Vargo is vice president of international economic affairs at the National Association of Manufacturers.

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