Large swings in aircraft orders over the past few months have resulted in a lot of volatility in the durable goods orders data from the U.S. Census Bureau. In December, new durable goods orders increased 3.6 percent, followed by a 3.8 percent loss in January. Now, we know that durable goods sales rose a sharp 5.7 percent in February. The primary driver of each of these shifts was the demand for defense and nondefense aircraft, which had plummeted in January but then rebounded strongly in February. Demand for autos was also strong, and in total, the transportation sector’s new orders for the month rose 21.7 percent.
If you were to exclude transportation from the analysis, new durable goods orders would have fallen 0.5 percent, suggesting that there continue to be some weaknesses in the manufacturing sector beyond aircraft and motor vehicles. Core capital goods, or nondefense capital goods excluding aircraft, experienced a 2.7 percent decline in new orders in February, somewhat offsetting the 6.7 percent increase the month before.
Looking at all durable goods sales beyond aircraft, there was some strength in motor vehicles (up 3.8 percent), electronic equipment and appliances (up 2.9 percent), primary metals (up 1.7 percent), and computers and electronic products (up 1.3 percent). But, these were offset by decreasing new orders in the fabricated metal products (down 4.4 percent) and machinery (down 2.2 percent) sectors.
Meanwhile, shipments of durable goods increased 1.0 percent in February, bouncing back from the 0.7 percent loss in January. On this measure, the gains were more broad-based, with weaknesses only in the nondefense aircraft (down 10.5 percent), communications equipment (down 1.7 percent), and primary metals (down 0.5 percent) sectors. The fastest pace of new orders in the month stemmed included defense aircraft and parts (up 6.8 percent), motor vehicles and parts (up 3.8 percent), machinery (up 2.7 percent), and other durable goods (up 1.7 percent).
The headline number for durable goods orders was up significantly, increasing at its fastest pace since September. But, if you peel back the onion, you quickly realize that new manufacturing orders are somewhat spotty, with the rebounds in auto aircraft and auto sales driving much of the data. The durable goods shipments information was more positive in that the gains were more broad-based, and ideally, we would like to see broader strength in new orders moving forward.
Chad Moutray is chief economist, National Association of Manufacturers.
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