The dollar may be soaring overseas, but the US economy has drifted toward stagnation — and it doesn’t seem to be looking better in 2015. Durable goods orders fell 1.4% in February, and even outside of the volatile transportation sector, it declined 0.4%. Business investment has turned for the worse as well:
New orders for manufactured durable goods in February decreased $3.2 billion or 1.4 percent to $231.3 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 2.0 percent January increase. Excluding transportation, new orders decreased 0.4 percent. Excluding defense, new orders decreased 1.0 percent. Transportation equipment, also down three of the last four months, led the decrease, $2.5 billion or 3.5 percent to $69.5 billion. …
Nondefense new orders for capital goods in February decreased $2.1 billion or 2.6 percent to $77.3 billion. Shipments decreased slightly to $80.2 billion. Unfilled orders decreased $2.9 billion or 0.4 percent to $727.8 billion. Inventories increased $0.3 billion or 0.1 percent to $186.8 billion. Defense new orders for capital goods in February increased $0.8 billion or 10.2 percent to $8.3 billion. Shipments decreased $0.1 billion or 0.8 percent to $9.0 billion. Unfilled orders decreased $0.7 billion or 0.4 percent to $152.9 billion. Inventories increased $0.7 billion or 3.0 percent to $24.9 billion.
January’s more positive figures got revised downward as well, which had been a bright mark in a three-month negative trend. New orders had dropped 3.7% in December, rose 2% in January, and had this decline released today. Excluding transportation, this has been the third straight month of declines. Non-defense capital goods have declined two out of the last three months on a much more volatile scale: -10.3%, +8.8%, and today’s -2.8%, indicating that businesses aren’t terribly interesting in investing in their own infrastructure.
Bloomberg breaks out the “U” word in its report on the latest economic indicator, and says that business investment looks worse than these numbers indicate:
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 percent after a 2 percent gain in January that was smaller than previously estimated, data from the Commerce Department showed Wednesday in Washington. The median forecast of 81 economists surveyed by Bloomberg estimated durable goods orders would rise 0.2 percent. …
Orders for non-military capital goods excluding aircraft, considered a proxy for future business investment, also dropped 1.4 percent in February, a sixth consecutive decline. That marked the longest stretch of decreases since mid-2012. They were projected to rise 0.3 percent.
Shipments of non-military capital goods excluding aircraft, which is used to calculate gross domestic product, increased 0.2 percent in February after falling a revised 0.4 percent the month before. January had previously been reported as a 0.1 percent gain.
If business investment has been falling for six straight months, it’s difficult to see why a decline in durable-goods orders would be unexpected. It appears that businesses have been expecting this to happen for some time now, and have seen it happen two out of the last three months.
The Associated Press’ Martin Crutsinger was less surprised, and also somewhat more optimistic:
The weakness in February was widespread, with weaker demand for commercial aircraft, autos and machinery. The result adds to a slew of disappointing data from recent economic indicators. Economists, however, expect domestic demand to strengthen in the months ahead and hope that will be enough to offset weakness caused by a stronger dollar, which dampens export sales of U.S. companies. …
Many economists are looking for manufacturing orders to start strengthening following a stretch of weakness in the second half of last year. They believe the end of harsh winter weather and the resolution of a labor dispute at West Coast ports, which caused supply disruptions, should help.
They expect strong consumer spending, powered by a year of healthy job gains, will boost domestic demand and help to offset global weakness and the strong dollar.
Growth in the overall economy slowed significantly in the October-December quarter, with a widening trade deficit trimming growth by more than a percentage point.
The question will be just how long economists can count on strong PCEs to keep the numbers afloat. If the factories are seeing fewer durable-goods orders, it seems like a pretty good indicator that consumers might be getting more cautious with their cash. Given how inexpensive gas became when the oil bubble popped, one would have expected that sudden boost in disposable income to translate into gains in durable goods. With three of four months going negative, it’s clear that whatever produced the momentary boost in 2014Q3 is not sustainable, and neither are the policies that produced it — and the five years of stagnation that preceded it.