Durable Goods Orders Drop in February

New orders for durable goods fell 1.4% in February to $231.3 billion, nearly erasing January’s 2.0% growth which was revised down, according to the latest report from the Census Bureau. It’s the third drop in the last four months.

The numbers conflict with many economists who predicted a slim, 0.1% gain, and it's a sign global issues are continuing to weigh on manufacturers in the U.S.

Orders for core capital goods, a benchmark for future business investment, lost 1.4%, continuing six straight months of declines. However, shipments, a sign of economic growth, rose slightly by 0.2%. 

Despite the down report, Daniel J. Meckstroth, chief economist for the MAPI Foundation, says there are some positive areas, "A couple of bright spots were the increases in orders for primary metals (1%), communications equipment (3%), and electrical equipment, appliances, and components (4.1%). The largest decline came in transportation equipment orders—down 3.5%—with a very large decline in aerospace orders. Machinery orders fell 1.8%, partly reflecting the decline in oil infrastructure investment.

Defense capital goods orders dropped 10%, while non-defense durable goods orders fell 1%. The big drops in these areas can’t be overlooked said Meckstroth, “The category of nondefense capital goods excluding aircraft takes out the very long lead time industries of defense and aerospace and concentrates only on near-term capital equipment orders, February’s report was not encouraging.”

Much of the blame for the down numbers is being placed on the extreme cold and snow that hit big portions of the country, and the work slowdown at West Coast ports. With both of those issues in the rear view mirror, Meckstroth is predicting a rebound, “The MAPI Foundation believes that manufacturing will accelerate out of the winter slowdown in the second quarter and post moderate growth for the year as a whole. Manufacturing industrial production increased 3.5% in 2014 and we forecast 3.7% growth in 2015. Although the pace of growth in 2015 is only slightly faster, it will exceed the growth rate of the overall economy.”

Follow this link for the complete durable goods report from the U.S. Census Bureau.