Durable Goods Orders Decline in February
Orders for durable goods unexpectedly dropped in February, a sign the slowdown in global growth may be weighing on American manufacturers.
Bookings for goods meant to last at least three years declined 1.4% after a 2% gain in January that was smaller than previously estimated, data from the Commerce Department showed March 25 in Washington.
The median forecast of 81 economists surveyed by Bloomberg News estimated durable goods orders would rise 0.2%.
Demand for American-made products may be softening as economies abroad struggle to accelerate and a stronger dollar makes it more attractive for foreign customers to buy from elsewhere. Increased business spending will be needed to provide a boost to the economy following what some economists are projecting as lackluster growth in the first quarter.
“Businesses have been extremely cautious,”said Stephen Stanley, chief economist at Amherst Pierpont Securities in Stamford, Connecticut, whose forecast for a 1.5% decrease in durable goods orders was among the closest. “The economy hasn’t been especially strong. In particular, people have had their doubts about the sustainability of growth.”
Forecasts in the Bloomberg survey ranged from a 2% drop to a 3.5% increase.
Orders for non-military capital goods excluding aircraft, considered a proxy for future business investment, also dropped 1.4% in February, a sixth consecutive decline. That marked the longest stretch of decreases since mid-2012. They were projected to rise 0.3%.
Shipments of non-military capital goods excluding aircraft, which is used to calculate gross domestic product, increased 0.2% in February after falling a revised 0.4% the month before. January had previously been reported as a 0.1% gain.
Joy Global Inc., the world’s largest maker of underground mining machinery, is feeling the pain of reduced equipment spending. Lower copper and coal prices have prompted mining companies around the world to rein in capital expenditures, hurting Joy’s sales of loaders and shovels.
“We had expected a slower first quarter with many of our customers taking extended production shutdowns,” Chief Executive Officer Ted Dohney said in a March 5 conference call. “Over the last several months, the global economic landscape has become more challenging.”
A rebound in business investment would provide a lift to the economy, which is expected to expand at a 2.2% annualized pace this quarter to match the previous three months’ rate, according to the median estimate of economists surveyed by Bloomberg this month.
Business equipment spending climbed at a 0.9% pace last quarter, the weakest since January-March 2014, according to the Commerce Department’s second estimate of GDP for the period. The third and final estimate of fourth-quarter growth is scheduled for release on March 27.
