WASHINGTON, March 26 — Orders for long-lasting US manufactured goods increased more than expected in February, while business spending on equipment showed tentative signs of recovery, boosting the economy's prospects in the first quarter.
The rebound in orders reported by the Commerce Department on Tuesday, which was driven by increases in transportation equipment, primary metals and machinery, suggested manufacturing could be regaining its footing after struggling in the aftermath of the Federal Reserve's hefty interest rate hikes.
"The data suggest that business equipment investment is beginning to recover, and with corporate bond yields likely to fall a little further over the coming months while manufacturing activity appears to be picking up again, we suspect that recovery has further to run," said Andrew Hunter, deputy chief US economist at Capital Economics.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, rose 1.4 per cent last month, the Commerce Department's Census Bureau said. Data for January was revised lower to show orders falling 6.9 per cent instead of 6.2 per cent as previously reported. Economists polled by Reuters had forecast durable goods orders would rise 1.1 per cent.
Orders advanced 1.8 per cent on a year-on-year basis in February. The outlook for manufacturing, which accounts for 10.3 per cent of the economy, is steadily improving amid expectations that the US central bank will start cutting rates this year.
A survey from the Institute for Supply Management this month showed manufacturers were fairly upbeat in March about sales and business conditions. Factory output rebounded in February.
The Fed has hiked its policy rate by 525 basis points to the current 5.25 per cent-5.50 per cent range since March 2022.
But the sector is not out of the woods yet.
Aircraft orders rise
Civilian aircraft orders increased 24.6 per cent last month after plummeting 63.5 per cent in January.
Boeing reported on its website that it had received 15 orders for commercial aircraft. While that was an improvement from the three orders booked in January, it marked a continued sharp slowdown from the end of 2023.
The planemaker is under pressure after a cabin panel blew out in mid-air on an Alaska Airlines jet in early January, with the Federal Aviation Administration barring Boeing from expanding production of its best-selling 737 MAX narrow-body planes to improve quality control.
Boeing announced on Monday that CEO Dave Calhoun would step down by the end of 2024 as part of a broad management shakeup.
Overall transportation orders climbed 3.3 per cent in February after dropping 18.3 per cent in January. Orders for motor vehicles and parts accelerated 1.8 per cent. Orders of primary metals rebounded 1.4 per cent and those of fabricated metals rose 0.8 per cent. Machinery orders increased 1.9 per cent.
But orders for computers and electronic products fell 1.4 per cent, while those for electrical equipment, appliances and components decreased 1.5 per cent.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 0.7 per cent in February after falling 0.4 per cent in the prior month.
These so-called core capital goods orders were previously reported to have been unchanged in January. Core capital goods shipments fell 0.4 per cent after rising 0.8 per cent in January.
Non-defense capital goods orders advanced 4.4 per cent, while shipments in that category rose 2.7 per cent after declining 3.0 per cent in January. Shipments of these goods go into the calculation of the business spending on equipment component in the gross domestic product report.
Business spending on equipment contracted in the fourth quarter. It has declined in four of the last five quarters. — Reuters
