Weather Blamed for Big Drop in Orders for Durable Goods : Economy: February figures reflect a decrease in aircraft and defense orders. Analysts say decline is only temporary.
Factory orders for big-ticket goods declined sharply in February as a reversal in aircraft and defense orders ended six months of advances for durable products.
But analysts said the decline reported Wednesday by the Commerce Department may in part be weather related and is probably only a temporary interruption in the upward trend for U.S. manufacturing.
The department said orders to factories for durable goods fell 2.5% in February, the first decline since July, when the indicator of manufacturing growth dipped 2.8%. Orders rose 4.4% in January, revised upward from the 3.7% the government estimated a month ago.
“The numbers were weaker than I thought,” said Michael Niemira of Mitsubishi Bank in New York City. “But I’m still moderately encouraged. They probably will rebound as we move forward.”
“The industrial sector will continue to advance in coming months,” said Bruce Steinberg of Merrill Lynch & Co. “However, the rate of increase is likely to slow to a more sustainable pace.”
The Commerce Department said orders for all items expected to last at least three years totaled a seasonally adjusted $145 billion. The record, $148.8 billion, was set in January.
February’s decline was due to a plunge in defense orders, down 30.6%, with volatile orders for aircraft and parts leading the way. Aircraft also accounts for a big part of the transportation component of the index; that sector slumped 9.2%.
Excluding transportation, durable goods orders were unchanged last month, and excluding defense orders, dropped 1%.
Car orders rose less than expected in February, analysts said, and many said automotive output has peaked and will decline in the next three months. But other factory orders likely will continue on the upswing, they said.
“There were big swings in January and February,” said Robert Brusca of Nikko Securities Co. International Inc. “It tells you weather is really affecting this report. There may in fact be more increases in output in March after a full recovery from the weather.”
Commerce Secretary Ronald H. Brown said, “While monthly figures may fluctuate, most economic trends still indicate that we are in a period of sustained economic growth.”
Some economists expect growth to be slowed further by the Federal Reserve Board’s decision to boost interest rates for the second time this year. The central bank, seeking to head off inflation, pushed its target for the federal funds rate--the interest that banks charge each other--up a quarter percentage point to 3.5%.
Higher interest rates could discourage consumers and businesses from purchasing expensive durable goods on credit.
Durable goods orders are a key barometer of manufacturing plans for production. A decline could dampen production and job growth.
Durable Goods
New orders in billions of dollars, seasonally adjusted
Feb., ‘94: 145.0
Source: Commerce Department
