New orders and shipments of durable goods, such as machinery and parts for motor vehicles, decreased in February. Economists pointed to inclement weather across multiple states and existing production slowdowns as key causes. At the same time, economists also said that this downturn may not be a major cause for concern.
New orders for durable goods fell by 1.1 percent after nine consecutive months of growth, and shipments fell by 3.5 percent after five months of growth according to the Department of Commerce.
February’s decrease in orders and shipments is not considered a major setback. Additionally, the decline might be offset as the money from the $1.9 trillion American Relief Package begins to make its way to consumers and businesses encouraging economic growth.
The winter storms in February greatly limited the ability of companies to deliver goods, which in turn affected orders and shipments and the companies’ ability to meet and fulfill demands.
The decrease in parts for motor vehicles orders was 8.7 percent, a significant downturn, due to the semiconductor shortage and major disruption by storms in states like Texas. Icy roads prevented distribution by trucks and the days-long power grid failure shut down businesses in sectors such as the petrochemical and auto corridors.
The petrochemical corridor is large stretch of highway that runs from Mexico through Houston and into Edmonton. The auto corridor starts from Texas, travels into Detroit and ends in Ontario. According to chief economist, Mike Englund, at Action Economics, “These two corridors are main arteries of American industry and when you disrupt these, all kinds of feeder industries –all the way down to the hotels and fast food restaurants along these routes — get shut down with it.”
For one trucking company, Allgayer Incorporated located in El Campo, Texas, which delivers and constructs drilling rigs from site to site, the winter weather interrupted the company’s operations in the midst of making a comeback a year into the pandemic.
“We were out for a solid 7 days,” said company owner, Jeff Allgayer, 45. Once employees were able to get back on the road, they returned to an office with busted water pipes, trucks with dead batteries, and another week of no electricity. “There was a whole string of events that happened that kind of kept us shut down. So, we were actually shut down for about two weeks,” Allgayer relayed.
Allegayer Incorporated was already mending revenue loss from the pandemic. While closed due to the storm, they suffered a $250,000 loss. It isn’t all bad news. March, so far, has been the best month the company has had since last October.
As for the new orders, economists did anticipate a slight increase which would have followed previous months’ trends, but they were not deterred by the decline in February.
“I think we have to take it with a grain of salt,” said Jennifer Lee, senior economist at BMO Capital Markets. “Considering the fact that we’ve been coming off quite a long streak of roughly 2 percent gains for core orders, which is quite strong for what it is. One month is not going to change that trend.”
Carl Riccadonna, chief U.S. economist at Bloomberg, estimates that by the end of April, they are hoping to see GDP growth of 6 percent regaining its prepandemic level. As businesses and consumers begin to recoup some of their costs, barring no destructive surprises in the natural world, experts are waiting for the data in April and May to assess if the downward trend is set to stay for a while or if it is just a blip.