US man­u­fac­tur­ing still weak, la­bor mar­ket flexes mus­cle

The Pak Banker - - 6BUSINESS -

New or­ders for long-last­ing U.S. man­u­fac­tured goods fell in Fe­bru­ary as the sec­tor con­tin­ued to strug­gle with the lin­ger­ing ef­fects of a ro­bust dol­lar and lower oil prices. While other data on Thurs­day showed an in­crease in the num­ber of Amer­i­cans fil­ing for un­em­ploy­ment ben­e­fits last week, re­vi­sions to the prior weeks' fig­ures showed the la­bor mar­ket was much stronger than pre­vi­ously thought.

The re­silience of the la­bor mar­ket has helped calm fears the econ­omy was head- ing into a re­ces­sion, and the com­bi­na­tion of tight­en­ing la­bor mar­ket con­di­tions and firm­ing in­fla­tion likely keeps the Fed­eral Re­serve on course to steadily raise in­ter­est rates this year.

"The econ­omy con­tin­ues to hold its own de­spite a slow­down in many other coun­tries around the world. The Fed can con­tinue with its pol­icy of grad­ual rate hikes," said Chris Rup­key, chief econ­o­mist at MUFG Union Bank in New York.

The Com­merce Depart­ment said or­ders for durable goods, items rang­ing from toast­ers to air­craft meant to last three years or more, de­clined 2.8 per­cent last month af­ter in­creas­ing 4.2 per­cent in Jan­uary. Durable goods or­ders have de­creased in three of the last four months.

Non-de­fense cap­i­tal goods or­ders ex­clud­ing air­craft, a closely watched proxy for busi­ness spend­ing plans, fell 1.8 per­cent af­ter ad­vanc­ing by a down­wardly re­vised 3.1 per­cent in Jan­uary. These so­called core cap­i­tal goods or­ders were pre­vi­ously re­ported to have in­creased 3.4 per­cent in Jan­uary. Econ­o­mists polled by Reuters had forecast durable goods or­ders fall­ing 2.9 per­cent last month and or­ders for core cap­i­tal goods slip­ping 0.1 per­cent.

U.S. stocks fell on the data and weaker oil prices. The dol­lar rose against a bas­ket of cur­ren­cies af­ter St. Louis Fed Pres­i­dent James Bullard said an­other U.S. in­ter­est rate "may not be far off." Prices for U.S. Trea­suries were mixed.

The U.S. cen­tral bank in­creased its short-term in­ter­est rate in De­cem­ber for the first time in nearly a decade. In a sep­a­rate re­port, the La­bor Depart­ment said ini­tial claims for state un­em­ploy­ment ben­e­fits rose 6,000 to a sea­son­ally ad­justed 265,000 for the week ended March 19.

The gov­ern­ment also re­vised data go­ing back to 2011, which showed claims gen­er­ally trend­ing lower than pre­vi­ously re­ported. Claims for the week ended March 5 were the lowest since Novem­ber 1973. The low level of claims has econ­o­mists an­tic­i­pat­ing an­other month of strong job gains in March af­ter non­farm pay­rolls in­creased by 242,000 in Fe­bru­ary.

"The U.S. jobs mar­ket re­mains solid. With a tighter jobs mar­ket, more peo­ple are look­ing for work and em­ploy­ers are rais­ing wages, both good news for con­sumer spend­ing and the over­all econ­omy in 2016," said Gus Faucher, deputy chief econ­o­mist at PNC Fi­nan­cial Ser­vices in Pitts­burgh. Strong do­mes­tic de­mand is help­ing to off­set some of the drag on man­u­fac­tur­ing from weak global con­sump­tion. De­spite Fe­bru­ary's drop in durable goods or­ders, there are signs the down­ward spi­ral in man­u­fac­tur­ing is draw­ing to an end.

Sev­eral re­ports in re­cent days have shown a pick-up in re­gional fac­tory ac­tiv­ity in March, lead­ing to op­ti­mism that a broader man­u­fac­tur­ing sur­vey will show the sec­tor ex­panded this month for the first time since Septem­ber.

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