The Commerce Department will release the advanced durable goods report on Monday. Economists expect a positive report after February’s slight decline, the first decline in nine months. With high vaccination rates in March, the report should signal an ever-fast-growing economy. Here are five things to watch for:
- Don’t expect the manufacturing sector to improve fast
Manufacturing has not been able to keep up with the demand for durable goods orders because they cannot fill the open jobs. If there aren’t people making the orders for items such as airplane parts, metals, machinery, etc., then there will be a steady decrease in production, which we’ve seen for months. Even though there were 30,000 jobs added in the manufacturing sector in March, industry employment is still 515,000 below February 2020.
Looking at sections such as unfilled orders on the report will show a backlog of orders that can’t be met.
“All these unfilled orders are really interesting to me right now, because they tell us, you know, how badly behind we are,” said Bryce Gills, an economist at First Trust Portfolios LP.
2. A rise in business investments
While jobs in the manufacturing sector remain far lower than before the pandemic, there is a good chance that business investments will increase. With many places having a tough time hiring back employees, investments in durable goods such as self service kiosks or robots on the assembly line are said to rise.
“Computers, robots, software, fuel-efficient delivery vehicles for example. Anything businesses basically invested to boost the productivity of their employees,” Gills said.
Investments that exclude aircraft are a great way to get a better understanding of the gross domestic product (GDP), as it feeds directly into it, Gills says.
3. Consumer durable goods will remain strong
Consumer spending on durable goods, things like washing machines and electronics, will continue to grow as people spend more money. The last report shows an increase of 6.8% in new orders for electrical equipment, appliances and compliments. The housing boom is a prime example of consumer spending. New home sales are up 10.4% but fell slightly in February due to severe weather storms. With better weather, the report should show a steady housing market.
“I think consumer spending is pretty strong,” said Robert Stein, deputy chief economist at First Trust Portfolios LP. “That should be good news.”
4. A usual volatile sector may show promise for the travel industry
Economists expect gains in the transportation sector, after a decrease in February, the first time in five months. As travel restrictions end and vaccinations now available for everyone 16 and up, the need for travel will continue to rise. Gills says that if there is an increase in transportation on the next report that it will distort the entire picture on a regular basis. With a large order of Boeing planes and the 737 MAX able to fly again, this category is bound to show a positive.
“I think it’s like a five to 10-year waitlist before anything is getting delivered,” he said. “That’s one of the issues with these huge volatile orders like aircraft.”
5. An overall increase in durable goods
After harsh winter storms led to a decrease in the last report, economists believe March will show gains in about every category. With the U.S. getting back to pre-pandemic lifestyles by safely restrictions being lifted and millions of Americans being fully vaccinated, durable goods will give a good outlook for the economy. Even with significant delays in the manufacturing sector, other investments and consumer durable goods continue to drive this indicator.