Durable Goods Orders Up But Show Weaknesses

Orders to U.S. factories for big-ticket goods rose 1.5 percent in February, the third straight monthly increase, lifted by stronger demand for airplanes, communications equipment and household appliances. But excluding transportation orders, durable-goods orders dipped 1.3 percent in February, suggesting that the manufacturing recovery is fragile. 

The advance in orders for costly manufactured items expected to last at least three years came after increases in December and January of 0.9 percent and 1.3 percent, respectively, the Commerce Department reported Tuesday. 

The latest snapshot of manufacturing activity is consistent with other economic reports suggesting that the battered sector is on the road to recovery after suffering through a slump that began a year and a half ago.

To cope, factories throttled back production and slashed hundreds of thousands of workers.

But in evidence that's turning around, the Federal Reserve reported that industrial production posted solid gains in January and February, and the Institute for Supply Management said that manufacturing activity flashed a growth signal in February.

In Tuesday's report, orders for transportation equipment posted the biggest gain, rising 8.6 percent in February, after a 3.9 percent advance. But most of the strength came from a huge, 41 percent jump in orders for airplanes and aircraft parts. Orders for new cars and trucks fell 5.9 percent, after a 5.3 percent increase in January.

Excluding transportation orders, which can bounce around a lot from month to month, durable-goods orders dipped 1.3 percent in February, marking the first such decrease in the last five months.

Orders for electrical equipment and household appliances grew 5.5 percent in February, after falling 6.1 percent the month before.

And, orders for communications equipment rose 0.9 percent, on top of a 7.3 percent gain. Orders for machinery were flat, after falling 1.4 percent.

There were weak spots in the report. Orders for computers and electronic products fell 2.4 percent in February, the first decline since September. Semiconductors saw orders drop by 8.9 percent, after soaring 21.3 percent in January. And, orders for computers dipped 3.1 percent, after a 4.5 percent rise.

Orders for primary metals, including steel, declined 3.1 percent, after increasing 2.3 percent.

Citing signs that the country is bouncing back from a recession that began last March, the Federal Reserve decided last week to hold short-term interest rates steady, just as it did in January.

With short-term interest rates at some of their lowest levels in four decades, consumers and businesses will still find it attractive to borrow to finance big-ticket purchases.