US Durable Goods Orders Slump Below Expectations

With orders for transportation equipment pulling back sharply, the Commerce Department released a report on Thursday showing new orders for US manufactured durable goods tumbled by much more than expected in the month of February.

The Commerce Department said durable goods orders slumped by 2.2 percent in February after jumping by 1.6 percent in January. Economists had expected durable goods orders to dip by 0.5 percent. The much bigger than expected decrease in durable goods orders came as orders for transportation equipment plunged by 5.6 percent in February after surging by 3.2 percent in January.

Orders for non-defense aircraft and parts led the way lower, plummeting by 30.4 percent in February after soaring by 10.9 percent in January. Excluding the steep drop in orders for transportation equipment, durable goods orders fell by 0.6 percent in February after climbing by 0.8 percent in January.

The decrease surprised economists, who had expected ex-transportation orders to rise by 0.6 percent. The unexpected drop in ex-transportation orders reflected notable declines in orders for machinery, computer and electronic products and primary metals.

The report also showed orders for non-defense capital goods excluding aircraft, a key indicator of business spending, dipped by 0.3 percent in February after jumping by 1.3 percent in January.

Shipments in the same category, which is the source data for equipment investment in GDP, rose by 0.5 percent in February after spiking by 2.1 percent in the previous month.

Durable goods activity is expected to regain their footing in the months ahead, owing to a still-solid domestic backdrop. Businesses may be more vigilant as recent events exacerbate logistics constraints and add upward pressure to prices, but they’re unlikely to pull back significantly on investment.

The overarching backdrop of healthy domestic demand backdrop will keep US businesses spending. In fact, greater supply chain strains will force US businesses to operate more adeptly and may encourage more investment.