U.S. Durables Orders Rose in January; Fell Ex-Transportation

By: Bob Willis, Business Week

Commentary:

The durable goods orders statistics are always a little volatile and it is not necessarily a great idea to pout too much faith in the numbers from just a month or two. This last set of data illustrates the challenges. The overall rate of durable goods orders rose (yay) but the bulk of the improvement was not felt in most of the sectors (boo) but there was growth in the aviation sector (yay for the aviation sector). The overall interpretation is that there has been some movement in goods that have a lifespan of over three years but not enough to signal that happy days have arrived for all parts of the manufacturing community.

By the first of this month the Purchasing Managers Index has arrived and it provides a bit more depth. The index rose for the sevenths straight month but the increase was less than had been expected by some analysts. The index had reached a peak of 58.5 in January but fell back to 56.5 in the latest incarnation of the survey. This is consistent with the data from the Credit Managers Index that measures the activity of the credit markets. Their January index had jumped dramatically and by February the level had dropped again. This is all very consistent with the assessment that has come from the economic analysts as they have watched manufacturing improve its inventory position over the last few weeks and months. At some point this recovery had to come to an end and then there would be a period of adjustment and that time seems to be at hand.

The crucial note will be sounded in the months to come for the PMI, CMI and for durable goods. There was some sense that consumer spending had started to rise in the last month as well and these breakaways from their frugal patterns are what the manufacturers have needed to see from consumers. Right now that growth is anemic and there is hope that patterns will play out in the next month or so. Spring temperatures often create some additional demand and that is always the case after a long and cold winter.

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