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Durable Goods Orders Fall for Second Straight Month

Feb. 27, 2014
For January the drop was 1% and December decreased 5.3%.

New orders for manufactured durable goods fell 1% in January, the Commerce Department reported on Thursday.  Last month the drop was 5.3%.

The drop was mostly due to civilian aircraft orders which plunged 20%.

“While on the surface the report seems alarmingly negative, it is not,” explained Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). “Aerospace has an extremely volatile order book month to month but its backlogs extend many years into the future.”

Meckstroth continues: “Frankly, current orders are virtually irrelevant to current activity. What does matter is that orders for primary metals and motor vehicles and parts were down in January but orders for fabricated metal products and computers and electronic products were up. The best economic indicator for business equipment activity in the report is nondefense capital goods orders excluding aircraft, which were up 1.7% in January after falling 1.8% in December.”

Excluding transportation equipment new orders increased 1.1%.

On a year-over-year basis, January orders were up 2.4%.

“The durable goods report basically reflects the findings of the industrial production report and the employment report for January,” said Meckstroth. “Business activity was adversely affected by the severe winter weather and is correcting for excess inventories built up in the fall.

"We believe the pace of growth in industrial activity will slow in the first quarter before resuming moderate growth for the rest of the year.”

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