By: Yuxin Gao
Manufacturers of long-lasting goods had the largest monthly new orders growth since August 2014—a positive sign that indicates domestic business is expanding, though modestly.
In January, new orders of durable goods—products that last at least three years after purchase—rose seasonally adjusted 4.9% compared with that in December. Excluding the transportation orders, durable goods increased 1.8% over the previous month.
The new reports ends a two-month period of downturn in new orders due to the unstable global market. The slowdown of the China’s economy and the stronger dollar in the global market has hampered the growth of domestic manufacturing and export.
The rise in new orders last month was largely led by the surge in sales of aircraft equipment. Non-defense aircraft orders surged 54.2% after Boeing received 67 orders of planes in January.
Economists usually ignore aircraft orders because they are volatile. So when aircraft orders were set aside, the 1.8% increase over the previous month is hard to ensure a growing trend.
Even with this months growth, durable goods new orders have not returned to the peak in December 2007, when the recession began. Over four years of economy recovery, manufacturing of long-lasting goods fluctuated monthly but the value in January this year is almost the same as it was in January 2015 and January 2014. In fact, orders have been stagnant since 2014.
Economist said other numbers in the report send a positive signal of business expanding.
“Although the overall business investment is still very slow, the investment spending is good enough to support the economic expansion,” said Christopher Low, chief economist at FTN Financial, an investment and banking counseling company.
One of the important sign is the growth of capital goods, which helps to produce other goods as business starts to expand. Non-defense non-aircraft capital goods showed an increase of seasonally adjusted 3.9% in January, reversing the -3.7% and -0.9% downturn in the previous two months.
Domestic manufacturing of computers and electronic products has continued to grow for 25 months. Almost all the sectors under durable goods have gained a seasonally adjusted modest increases over the last month.
Economists believe durable goods growth will help the U.S. domestic economy to withstand the slowdown in Europe and many other major developing countries in the world .
“It suggested that the U.S. economy is steadily increasing, not like the previous fear of market that we are in the recession,” said David Kelly, chief market strategist at J.P. Morgan Asset Management.
Reported by Yuxin Gao. Contact: yuxin.gao@journalism.cuny.edu
