New orders for durable goods gained 1.7% in February from January, totaling $235.4 billion. On a 3MMA basis the year on year (y/y), change was a positive 1.1%, while the 3MMA change over 12 months was an encouraging 2.9%. Orders for January were revised upward by 0.3% from 2.0% to 2.3%.
Figure 1 shows the history of durable goods orders from 2010 to present on the left-hand scale and the percentage change y/y on the right-hand scale. Orders struggled in 2015 and 2016 after a generally robust period in the 2010 to 2014 timeframe. February was the first month of the last 11 months where the three month moving average (3MMA) y/y change over 12 months was a positive number. Durable goods data is often volatile because of the large influence from aircraft, (both defense and non-defense), orders. The core capital goods orders gives a better read on the underlying strength in the economy and it was down slightly (-0.1%), the first down month since September.
Data for manufacturers were mostly positive. Manufacturing surveys are increasingly optimistic as the business environment is upbeat. Primary metals activity increased by 2.3% month on month and y/y after struggling for most of the last two years. Machinery orders eked out a gain of 0.1% over January.
Overall this month’s durable goods orders report was in line with economists’ expectations. Demand-side fundamentals would seem to support continued growth, however headwinds from the strong dollar continues to constrain US exports of capital goods. With further interest rate increases on the horizon, the dollar will continue to present a challenge for exporters.
At Gerdau, we routinely monitor durable goods orders since it provides a good read on the current health of the US economy and its probable short-run future.