Rising durable goods orders point to pick up in business spending | RJO Futures

March 24, 2017 10:03AM CDT

New orders for durable goods, a telltale sign for the U.S. economy, climbed in February for the second straight month.  Orders for durable goods advanced 1.7% while the increase in January was raised several notches to 2.3%, reflecting a pickup in manufacturing that kicked in toward the end of last year. 

Economists polled by Market Watch had forecast a 1.6% increase. The Dow Jones Industrial Average rose in Friday trades.  The increase in bookings last month was spearheaded by commercial aircraft, whose orders jumped almost 48%. That offset a nearly 1% drop in orders for new cars and trucks. If transportation is set aside, new orders for manufactured goods rose a smaller 0.4%, the Commerce Department reported Friday Pentagon orders were a drag.  Still, orders minus transportation have advanced for six straight months.  A key measure of business investment, meanwhile, fell slightly but it was just the first decline in five months. So-called core orders dipped 0.1%. 

Despite a drop in core orders in February, they have risen 2.7% in the past year. That's the second biggest gain in a 12-month span in three and a half years.  Business investment is one of three pegs that underpin the U.S. economy, but it's been underwhelming during the current expansion that began in mid-2009.  Surveys of executives at big and small companies alike suggest investment could pick up even faster soon on the hopes that a pro-business Trump administration fulfills its biggest goals. 

Even still, it's too early to tell if Republicans will succeed, especially given their difficulties in replacing Obamacare. The goods new is, business investment appears to have recovered from a slump that started in 2014 and persisted through the first half of 2016. Shipments of core capital goods jumped 1% in February. Shipments are fed into the government's formula for calculating gross domestic product, the official scorecard of the economy. That could give a boost to first-quarter GDP. 


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