Reem Nasr
As winter weather gives way to warmer spring days, so comes a positive outlook for last month’s durable goods report.
Forecasts show that new orders will have increased 2.0 percent in March, according to analysts surveyed on Bloomberg. They expect Thursday’s report, due for 8:30 a.m., to show a snap back from the winter slowdown that made for a soft start to the year. In February, new orders increased 2.2 percent, although the bulk of it was confined to the transportation sector.
If predictions are right, that would mean the manufacturing of long-lasting goods, like microwaves and computers, will be on track to push forward into what is expected to be a stronger second quarter for the U.S. economy.
“There is reason to believe in a reasonable pickup with weather in the rearview mirror,” said Barry Habib, CEO of MBS Highway.
Habib explained that an improving employment situation and historically stronger numbers come the warmer months, are another reason why the 2.0 percent increase is likely.
American manufacturing got off to a soft start this year. New orders for durable goods was down 1.3 percent in January. Nondefense capital goods decreased the following month by 2.8 percent, creating worry among economists that manufacturing was still too weak.
“There is improvement but it’s nowhere near robust,” added Habib.
The projected increase for March would need to include a significant gain in planned spending on capital goods, which is a gauge of the overall economy’s health.
Most of the volatility in the monthly durable goods report comes from big ticket purchases in aircraft and defense. Boeing orders for new aircraft in March were a high 163 orders; that means the transportation component will likely be strong for the month.
A bright look at the March retail and auto sales numbers have Shawn DuBravac, chief economist at the Consumer Electronic Association, expecting modest improvements that should continue into the second quarter.
“The slow start to the year comes after generous spending over the holiday season,” DuBravac said. “The rest of 2014 should be good, but not great.”
William Stamps Howard is an industrial machine consultant who spends most of his time visiting factories around the country. He said that American manufacturing is on the right track.
“Most are doing well but certainly not great,” said Howard. “Managers tell me it’s tough out there but not impossible.”