The Feb. 26 report on durable goods orders suggests near-term problems for the US manufacturing sector. True, headline durables orders were up 2.8%, which sounds substantial. However, virtually all that gain occurred in aircraft orders, and even those gains failed to fully reverse previous months' declines in aircraft orders.
For total durables orders excluding aircraft, there were small January gains (+0.3%) which did not come close to reversing substantial declines over the previous months. The recent course of total durables orders has run parallel to that of capital goods orders excluding aircraft, the blue line in the chart. After flat orders in July and August, we saw substantial declines over September–December, and then only a slight gain in January.
Any economic series displays random fluctuations, so one must be careful interpreting data over one or two months. However, when a series holds below trend for four months, as have capital goods orders and total durables orders, those movements become more credible. This is especially true when we have confirming trends in an accompanying series, and recently the Federal Reserve's index of industrial production in manufacturing has slowed.
In the last installment of "By the Numbers," we described the US housing market as a three steps forward, two steps backward affair. The same can be said of the US economy overall, and recently, manufacturing has been one of those backward steps.
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