It appears as if economic activity could actually pick up through the end of the first-quarter. According to the U.S. Census Bureau, new orders for manufactured durable goods increased 2.2 percent on the month and 0.2 percent on the year in February to $229.4 billion, beating estimates for a more modest increase of 1.0 percent. This increase follows two consecutive months of declines in December and January.
Excluding new orders for transportation equipment, which can be subject to seasonal and cyclical volatility, durable goods orders increased 0.2 percent on the month and 1.5 percent on the year. New orders for transportation equipment increased 6.9 percent sequentially to $71.4 billion, or about 31 percent of total spending.
Excluding new orders for defense equipment, which are subject to the vagaries of politics, durable goods orders increased 1.8 percent. New orders for defense equipment increased 2.2 percent sequentially and is up 0.8 percent year to date compared to last year.
The durable goods data for February compliments the Institute for Supply Management’s Manufacturing Report on Business. ISM maintains a purchasing manager’s index for the manufacturing industry, which increased 1.9 percentage points sequentially in February to 53.2, indicating accelerated growth. Supply executives did report that the cold weather was a headwind, but the new orders component of the headline index still increased. Production, however, declined from 54.8 to 48.2, contraction territory. If this contraction is mostly weather-based, then market watchers should expect to see production increase in March as bad weather clears out.