Rebound in Durable Goods Orders Provides Positive Outlook for US Economy

Published / Modified Apr 02 2024
Source: U.S. Census Bureau, CSIMarket Team / CSIMarket.com

Rebound in Durable Goods Orders Signals Positive Outlook for US Economy

In February 2024, the US economy witnessed a significant rebound in durable goods orders after two consecutive monthly decreases.
New orders for manufactured goods increased by 1.4 percent or $8.2 billion, reaching a total of $576.8 billion.
This positive trend provides a promising outlook for the US economy, particularly in light of the recent slowdown in the manufacturing sector.

The growth in durable goods orders was even more encouraging when excluding defense bookings, which experienced a robust increase of 1.41 percent.
This category offers a better indication of longer-term trends in the private sector, as defense product purchases by the government can sometimes distort the data.

Orders for US-made products designed to last at least three years also witnessed growth in February, rising by 0.46 percent to $278 billion.
This increase can be attributed to the significant growth in bookings for defense aircraft and parts, which surged by 10.69 percent to $15 billion.
However, it is important to note that government purchases of defense products can impact the data in an uneven manner.

While transportation and defense led the rise in demand, nearly every sector reported an increase, according to the Commerce Department.
This widespread growth further reinforces the positive momentum in the durable goods sector.

Despite the normal fluctuations in big-ticket purchases, new orders for U.S.-made big-ticket items rose by 3.8 percent over the past 12 months, indicating a positive long-term trend.
Additionally, unfilled orders experienced a substantial increase of 20.54 percent, highlighting a sustained growth trajectory in the market.

The durable goods segment typically includes bulky or heavy products meant to last for at least three years, such as trains, computers, or furniture.
However, the volatile nature of the government's durables report can lead to significant swings in monthly data.

Looking at January's figures, new orders were revised to a decline of 6.4 percent, amounting to $277 billion, while shipments dropped by 1.12 percent to $279 billion.
The month-on-month change in inventories remained unchanged in February, maintaining stability in the market.
The inventory-to-shipments ratio also improved, falling to 1.86 from 1.89 in the previous month, indicating efficient inventory management.

Core capital goods, a category closely tracked by economists, grew at a slower rate compared to total bookings, with a 0.21 percent increase.
Excluding defense and transportation, this category offers crucial insights into the longer-term trends within the private sector.
Over the past year, core capital goods bookings decreased by 0.98 percent, while inventories increased by 6.61 percent.

In terms of shipments of US-made products designed to last three years or more, there was a noteworthy increase of 1.31 percent to $283 billion in February.
Excluding the volatile transportation sector, shipments grew by a modest 0.09 percent.

Unfilled orders experienced a slight decline of 0.03 percent, primarily driven by a decrease of 1.47 percent in defense aircraft and parts unfilled bookings.
It is important to consider that government purchases of defense products can intermittently distort data trends.
Nonetheless, in comparison to a year ago, unfilled orders soared by an impressive 20.54 percent.

Overall, the rebound in durable goods orders is an encouraging sign for the US economy, especially given the recent loss of momentum in the manufacturing sector.
Despite the normal fluctuations witnessed in this segment, the upward trend in big-ticket purchases remains intact.
This positive economic indicator suggests potential growth and stability for the future.