A fall in orders for transportation equipment led to a drop last month in new orders for manufactured durable goods.
“In short, the orders figures were broadly disappointing and dashed hopes that January’s gains might mark the start of a new upward trend,” noted Tim Quinlan, senior economist at Wells Fargo’s Economics Group, in a report on the data.
The Commerce Department data released today show new durable goods orders decreased $6.6 billion, or 2.8%, to $229.4 billion in February, and durable goods have been down for three of the last four months; January saw a 4.2% increase.
New orders for transportation equipment were down $4.9 billion, or 6.2%, to $74.2 billion. Within this category, declines in aircraft orders were a prime culprit–civilian aircraft orders dropped 27.1% and defense aircraft fell 29.2%, the Wells Fargo report states.
Other areas that saw a larger decline include new orders for electrical equipment, appliances and components, down 2.8% to $9.8 billion, and machinery, down 2.6% to $31.6 billion, the Commerce Department reported.
Shipments of transportation equipment, down 1.2% to $79 billion in February, also led an overall monthly decrease in manufactured durable goods shipments in February, which fell 0.9% to $238.3 billion.
Unfilled orders for manufactured durable goods also decreased for two of the past three months, again, driven by transportation equipment, which fell 0.6% to $789.1 billion, the Commerce Department said.
Overall unfilled orders for durable manufactured goods dropped 0.4% to $1.2 trillion.
The gray outlook continued in February for inventories of durable goods, which have been down seven of the last eight months. Commerce saw overall inventories decrease in February by 0.3% to $394.3 billion, led by primary metals, which have been down for more than a year, and dropped 1.2% to $33.2 billion.
Is a recession imminent?
Considered by analysts to be a good proxy for current quarter equipment spending, core capital goods shipments dropped for the second consecutive month, putting the three-month annualized rate of decline at 6.8%, Wells Fargo said.
“When the three-month annualized rate of decline starts falling on a double-digit percentage basis, it is often an indication of recession,” Quinlan wrote. “To be clear, we do not think the U.S. economy is headed for imminent recession, but the manufacturing sector is a clear vulnerability. Headline GDP growth figures will not be getting much help from business spending in the near future.”
- Nicholas Stern, NACM editorial associate