Manufactured Durable Goods in the U.S. Experience Consecutive Growth, Alleviating Concerns of Long-Term Slowdown

Published / Modified Apr 24 2024
Source: U.S. Census Bureau, CSIMarket Team / CSIMarket.com

New Orders for Manufactured Durable Goods on the Rise, Indicating Temporary Lull in U.S. Growth

In March 2024, new orders for manufactured durable goods in the United States increased by 2.6 percent or $7.3 billion to reach a total of $283.4 billion.
This marks two consecutive months of growth, providing some reassurance in the wake of a recent pullback.
However, the news was not all positive, as shipments of durable goods experienced a slight decline of 0.10 percent to $282 billion.

The Commerce Department reported that orders for U.S.-made products designed to last three years or more, such as automobiles or appliances, increased by 1.97 percent to $283 billion on a seasonally adjusted basis.
This represents a $5 billion increase from $278 billion in February.
The surge in demand was led by the transportation and defense sectors, although nearly every sector tracked by the Commerce Department reported an increase.
This growth in the manufacturing sector suggests that the recent decline in new orders is likely a temporary lull, yet another poor report could reignite concerns over U.S. economic growth.

Over the past 12 months, orders for U.S.-made durable goods experienced a 2.54 percent increase, while inventories grew by 8.01 percent.
Unfilled orders also showed signs of recovery, as they surged by 0.31 percent on a seasonally adjusted basis.
Notably, unfilled orders for aircraft and parts grew by 1.01 percent, reaching $657 billion.
When compared to the same period last year, unfilled orders saw a significant increase of 20.43 percent.

However, despite the overall improvement in new orders, a category known as core capital goods, which is considered the report's best indicator of private-sector trends, witnessed a decline of 0.03 percent on a seasonally adjusted basis.
This category excludes defense and transportation and provides a better indication of longer-term trends in the private sector.
Meanwhile, shipments of core capital goods grew by 0.06 percent.
Over the past 12 months, core capital goods bookings decreased by 0.64 percent, while inventories experienced a 5.69 percent increase.

Another noteworthy announcement by the Commerce Department was the 0.17 percent increase in total durable goods inventories, totaling $528 billion in March on a seasonally adjusted basis.
This marks a $1 billion increase from $527 billion in February.
The growth in inventories was mainly driven by a 2.41 percent increase to $82 billion in aircraft and parts inventories.
Additionally, the inventory-to-shipments ratio grew from 1.86 to 1.87, illustrating a slight buildup of stock in relation to shipments.

However, the news was not entirely positive for durable goods shipments, which declined by 0.10 percent to $282 billion in March, representing a $0 billion decrease from February.
This drop was primarily driven by an 11.20 percent decrease in defense aircraft and parts shipments, which accounted for 3.82 percent of total durable goods shipments.
It's important to note that government purchases of defense products can be uneven and sometimes distort the data.
On the other hand, shipments excluding the volatile transportation sector experienced a modest growth of 0.03 percent.

Understanding the impact on shareholders and putting this news into context, the consecutive growth in new orders for manufactured durable goods provides some reassurance to investors.
The increase in demand across various sectors suggests that the recent decline in new orders is not indicative of a long-term trend.
Shareholders may take this as a positive sign, potentially leading to increased confidence in the market and driving investment decisions.

However, with the decline in durable goods shipments, especially in the defense sector, some caution is warranted.
Government purchases of defense products can cause fluctuations in data, and it is important to closely monitor future reports to determine if the decline persists or if it was merely a temporary setback.
Overall, while the manufacturing sector shows signs of recovery, it is crucial for investors to remain vigilant and evaluate the broader economic conditions before making any major investment decisions.


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