The March durable goods report is expected to be weak, showing the first signs of the coronavirus pandemic on manufacturing orders. Here’s what to watch in the monthly report out Friday at 8:30 am Eastern time:

  • It’ll be bad but it won’t capture the full picture. 

Economists are estimating that new orders for durable goods — products that have a life expectancy of three or more years — will see a decrease in March as a result of work stoppages and closures that took place early last month.

Orders for durable goods excluding transportation and defense which are volatile month to month are generally a sign of business investment and outlook for economic growth. The March report will show the first effects of the pandemic on the manufacturing sector. 

But it won’t show the full picture as many parts of the country remained open well into March when the data are collected. April’s report will capture more of the effect of social distancing and closures across more parts of the country. Early signs of April’s effects are captured in other surveys conducted by private companies and look a lot worse.

“Surveys in April were horrific,” said Michelle Meyer, head of U.S. Economics at Bank of America Securities, Inc in a report. 

  • Data collection could be a problem. 

Many economic indicators are based on surveys conducted by the government but as businesses and factories shut down, it may be difficult to get people on the phone. The data for durable goods orders are based on information obtained from most manufacturing companies with $500 million or more in annual shipments as well as some smaller companies.

“In a lot of cases, people are working from home,” said Scott Brown, chief economist at Raymond James & Associates. “Generally, the response rate is going to be a lot lower.”

Going forward, the response rate on economic survey data will be important to track to understand just how challenging data collection might be during the pandemic. 

  • Transportation orders will be especially weak and core capital goods will show a decrease in business investment. 

Orders for transportation-related goods like motor vehicles and airplanes will show weakness in the March report, as the airline industry was among the earliest affected by the pandemic. 

Excluding transportation and defense, orders for core capital goods will also be negative, demonstrating a decrease in business investment.

Orders for core capital goods generally indicate future work and prospects for growth. But manufacturing requires some level of on-site work in factories, and companies will be reluctant to invest in more plants and equipment at a time when work cannot happen. 

  • There are long-term changes expected in manufacturing.

Going forward, more manufacturing may be produced closer to home as the pandemic has revealed the problems associated with the concentration of global manufacturing activity in one place. 

The pandemic exposed as early as January and February how dependent the United States and Europe are on China for a wide range of goods. American companies in industries like pharmaceuticals and technology may look for ways to spread the supply chain as part of the recovery. 

“We don’t expect the new normal to look like the old normal,” said Brown. 

Companies were already looking to bring work closer to home because of tariffs and trade war with China according to Brown.

  • Recovery will depend on how the country gets back to work in the coming months.

Economists expect that durable goods orders will bottom out in May, but there won’t be good news for months after that. Real recovery depends on whether social distancing can be safely relaxed.

“The recovery process is really likely to be a lot more gradual than people had hoped for, even just a few weeks ago,” said Brown. 

Too fast an attempt to get the country back to work could show a small rebound in economic activity followed by more spread of the virus and another drop – what experts are calling a “W-shaped” recession curve. 

Different parts of the country may become hotspots at different times, requiring a coordinating approach to resuming economic activity, according to Brown.