Orders for Manufactured Goods Hit Record Levels
New orders for costly manufactured goods bounced up to record levels in February, the Commerce Department said Wednesday, underlining the vigorous manufacturing sector’s role in a steadily growing economy.
Orders for so-called durable goods--from computers to railroad equipment--climbed 1.5% last month to a seasonally adjusted record $178.3 billion, following a revised surge of 4.1% in January.
Analysts said the strong tempo of factory business, which was accompanied by rising shipments of finished goods and fattening backlogs of unfilled orders, affirmed the economy was expanding fairly briskly in the first quarter.
“The February orders data does not contain any signs of an impending slowdown in the manufacturing sector,” said Joel Naroff, a Philadelphia-based economist for First Union Corp.
“Indeed, manufacturing activity is likely to rise in the second quarter as firms ramp up production to meet rising demand,” he added.
The strong durable-goods report followed Tuesday’s decision by the Federal Reserve Board to boost short-term interest rates by a quarter of a percentage point, trying to tamp down demand to head off inflation.
Asha Bangalore, an economist with Northern Trust Co. in Chicago, said the stronger orders report appeared to vindicate the Fed’s move since it was a broad-based gain across most types of industries.
“It’s certainly convenient to justify what the Fed did,” Bangalore said, adding that lean business inventories currently mean there is likely to be considerable restocking in coming months that will add to overall economic momentum.
U.S. bonds fell for a second day after the report’s release, with the yield on the benchmark 30-year bond yield rising to 6.98% from 6.97% on Tuesday. The Dow Jones industrial average closed up 4.53 points to 6,880.70.
Many analysts foresee at least one more interest rate hike by the U.S. central bank, aimed at keeping the 6-year-old expansion on track.
Total national output boomed ahead at a 3.9% rate in the final three months last year and is generally seen still expanding at about a 3% annual rate.
The Commerce Department revised upward January’s durable-goods increase slightly, to 4.1% from a previously reported 4%. It was the biggest monthly gain in four months, since a 4.5% rise in orders in September.
Durable goods are items such as home appliances and production machinery intended to last at least three years.
Since they take longer to produce and cost more to buy, orders for them are a significant measure of manufacturing activity.
The biggest gain in February orders was for electronic and electrical equipment, up 7.4% to $30.6 billion after an even stronger 17.9% jump in January.
Industrial machinery and equipment orders rose for a third consecutive month, up 2.2% to $33.2 billion in February after a 0.9% January increase.
But transportation orders declined 3.6% to $40.8 billion after a 1.6% January rise. The Commerce Department said there were declines in orders for all types of transportation items except railroad equipment.
Orders for non-defense capital goods, an indication of business investment in new equipment, gained a strong 3.7% to $47.6 billion last month after a 4.5% surge in January.
Shipments of durable goods, an indication of current demand, climbed 1.4% to $173 billion after a 1.1% rise in January.
Unfilled orders increased 1.1% last month to $499.5 billion after rising the same percentage in January.
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Durable Goods
New orders, in billions of dollars, seasonally adjusted. Source: Commerce Department
