Orders for long-lasting factory goods decreased for the first time in 10 months in February, according to U.S. Department of Commerce data released on Wednesday.
New orders for durable goods fell 1.1% to a seasonally adjusted $254 billion in February, compared with January, while new orders for nondefense capital goods excluding aircraft and parts — a closely watched proxy for business investment — decreased by 0.8% from the prior month.
The declines follow a 3.5% increase in January and were below the forecast of economists polled by Reuters, which had called for core capital goods orders rising 0.5%.
Durable goods orders were driven down by a 1.6% decline in orders for transportation equipment, highlighted by an 8.7% drop in motor vehicles and parts and a 3.7% reduction in defense aircraft and parts.
One bright spot was the 103.3% increase in orders for nondefense aircraft and parts, which comes on the heels of Boeing’s announcement that it had sold 82 aircraft in February.
At the same time, shipments of core capital goods fell 3.5% last month, led by an 8.2% drop in transportation equipment. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.
While the overall February decline in durable goods orders was unexpected, they are still up 3.2% over the past 12 months and we expect that growth to remain in the near term. In addition, recent data from IHS Markit – the Flash U.S. Manufacturing Purchasing Managers’ Index — noted that new orders growth showed the fastest pace in six and a half years.
While we expect supply chain challenges to persist, the recently approved fiscal stimulus package, as well as positive progress in the vaccine rollout, should lead to strong demand.
Overview of U.S. durable goods orders
Data on orders of durable goods, released on a monthly basis by the United States Census Bureau, measures the cost of orders received by manufacturers for goods planned to last for three years or more, such as motor vehicles, household goods or medical equipment. Because those durable products often involve large investments across large supply chains, they can be reflective of the health of the U.S. economy.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.