Orders of durable goods rise 1.2% in February
WASHINGTON — Orders to U.S. factories for bigticket manufactured goods rose by a solid amount in February, but the gain came before the coronavirus had shut down much of the country.
The Commerce Department said Wednesday that durable goods orders rose 1.2% last month, rebounding from January, when orders had shown only a 0.1% gain.
However, with all the shutdowns that have occurred as authorities try to deal with the coronavirus, economists are expecting weak reports in the coming months.
The durable goods report showed that the 1.2% February gain, which pushed total orders to a seasonally adjusted $249.4 billion, was the best performance since a 2.8% advance in December.
Factory orders for business equipment, a key category that serves as a proxy for businesses’ plans on investment, fell by 0.8% in February after a 1% rise in January.
This category, which has been weak over the past year, had fallen 0.8% in December.
Shipments of business equipment, a figure used in gross domestic product calculations, decreased 0.7% after rising in January by the most in a year. While the U.S.-China trade deal was seen as helping stabilize capital spending after the biggest quarterly slide in equipment outlays since 2015, Boeing’s 737 Max production halt was projected to weigh on manufacturing.
Boeing plans to restart production of the 737 Max by May, Reuters reported Tuesday. The aircraft-maker also asked suppliers to be ready to ship parts in April, Reuters said.
The coronavirus pandemic represents a new and immense challenge for domestic producers. As global economies come to a stop while authorities try to contain the spread, business investment is likely to be dialed back sharply in the second quarter.
Many analysts believe the virus has already pushed the country into a recession, with the most pessimistic forecasting that the overall economy, as measured by GDP, could plunge by 20% or more in the April-June quarter.
Analysts said they expected a sharp deterioration in orders to show up in the March report.
“Businesses were not canceling orders yet to any significant degree, but that’s going to change in March as the coronavirus will take a toll on factory production in many states which have shelter-in-place rules,” said Chris Rupkey, chief financial economist at MUFG in New York.
Gregory Daco, chief U.S. economist at Oxford Economics, said, “We now believe the additional head wind posed by the coronavirus will lead to one of the largest pullbacks in capital spending of all times.”
Orders for transportation equipment, including aircraft and automobiles, surged 4.6% in February after a decline a month earlier. Excluding transportation, durable goods orders decreased 0.6% after rising as much in January.
Orders for machinery fell by 0.5% while orders for computers were down 0.6%.
Orders for defense capital goods, which are volatile month to month, jumped 25.7% after a 36.1% slump.
Durable goods inventories were little changed in February.