Tags: durable goods | economy | growth | products

Durable Goods Orders in Unexpectedly Drop

Wednesday, 25 March 2015 08:44 AM

Orders for durable goods unexpectedly dropped in February, a sign the slowdown in global growth may be weighing on American manufacturers.

Bookings for goods meant to last at least three years declined 1.4 percent after a 2 percent gain in January that was smaller than previously estimated, data from the Commerce Department showed Wednesday in Washington. The median forecast of 81 economists surveyed by Bloomberg estimated durable goods orders would rise 0.2 percent.

Demand for American-made products may be softening as economies abroad struggle to accelerate and a stronger dollar makes it more attractive for foreign customers to buy from elsewhere. Increased business spending will be needed to provide a boost to the economy following what some economists are projecting as lackluster growth in the first quarter.

“One can ascribe some of that to the strong dollar — you would expect to see machinery and other forms of manufacturing equipment demand weaken somewhat,” Millan Mulraine, deputy head of research and strategy at TD Securities USA LLC in New York, said before the report. Momentum in manufacturing has “slowed over the past few months.”

Forecasts in the Bloomberg survey ranged from a 2 percent drop to a 3.5 increase.

Orders for non-military capital goods excluding aircraft, considered a proxy for future business investment, also dropped 1.4 percent in February, a sixth consecutive decline. They were projected to rise 0.3 percent.

Business Investment

Shipments of non-military capital goods excluding aircraft, which is used to calculate gross domestic product, increased 0.2 percent in February after falling a revised 0.4 percent the month before. January had previously been reported as a 0.1 percent gain.

Joy Global Inc., the world’s largest maker of underground mining machinery, is feeling the pain of reduced equipment spending. Lower copper and coal prices have prompted mining companies around the world to rein in capital expenditures, hurting Joy’s sales of loaders and shovels.

“We had expected a slower first quarter with many of our customers taking extended production shutdowns,” Chief Executive Officer Ted Dohney said in a March 5 conference call. “Over the last several months, the global economic landscape has become more challenging.”

A rebound in business investment would provide a lift to the economy, which is expected to expand at a 2.2 percent annualized pace this quarter to match the previous three months’ rate, according to the median estimate of economists surveyed by Bloomberg this month.

Business equipment spending climbed at a 0.9 percent pace last quarter, the weakest since January-March 2014, according to the Commerce Department’s second estimate of GDP for the period. The third and final estimate of fourth-quarter growth is scheduled for release on March 27.

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Orders for durable goods unexpectedly dropped in February, a sign the slowdown in global growth may be weighing on American manufacturers.
durable goods, economy, growth, products
Wednesday, 25 March 2015 08:44 AM
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