By Yuxin Gao
The U.S. Department of Commerce will publish its first look at this month’s manufacturing sector performance at 8:30 a.m. on Tuesday this week. Economists expect long-lasting goods orders, a main indicator for U.S. manufacturing and business expansion activities, expands at a 1.9% rate, according to 76 economists’ median estimation for Bloomberg.
1. March was an important month
In January and February, factors like abnormal winter weather, early Chinese Lunar New Year complicated durable goods numbers. As the holidays ended and spring came, March’s durable goods new orders will start to show the real demand for U.S. manufacturing businesses.
“There is nothing we can point to and say things are better or worse because of some other factors, ” said Andrew Zatlin, founder of SouthBay Research advisory firm. “This is going to be a pure trend line. ”
New orders for durable goods has gone down in three of the last four months, which made economists worry that the manufacturing industry would shrink. Economists have been waiting for March’s report because it will give a hint of what the rest of the year will look like.
2. Manufacturers postpone investment plans
Regional factory sector surveys showed businesses are holding on to their cash and are delaying capital projects. “We kind of anticipated it’s going to be a relatively soft quarter for capital spending,” said Scott Brown, chief economist at Raymond James financial service. A lot of business are waiting for further signs to tell them the next move. They have the cash to invest, but they have not received new orders yet.
Stagnated investment was led by the weak global economy, including Brazil’s financial crisis, European stagnancy, and China’s slowdown. In February,new orders for durable goods decreased a seasonally adjusted 3.1%, a sharp reversal from January’s 4.3% growth. This kind of back-and-forth has lasted for more than a year.
3. Larger and faster job losses
In March, manufacturing industries lost 29,000 jobs. Durable goods industries accounted for 24,000 of them. The job loss was mainly reported in machinery, computer and electronic products, and primary metals industries. Since reaching an employment peak in March 2015, durable goods manufacturers have cut a total of 68,000 jobs.
4. A weaker dollar may benefit exports
After getting stronger for nearly three years, the U.S. dollar began to weaken in mid-January. This improved American exports to its main trading partners –Canada and Mexico because the value of U.S. dollar decreased as compared to Mexican peso and Canadian dollar.
5 Oil prices decline can boost machinery orders
Oil prices hit bottom in February with the average price of $30 per barrel. In March the price rose to average $37-38 per barrel. Now it is close to $40, according to crude oil prices West Texas Index.
Oil-related manufacturers have been struggling for quite a while. Drilling investment has declined. But with the higher oil prices we might see some increase in machinery orders and fabricated metals orders in March’s report.