Once again, actual orders don't remotely resemble the strength in ISM. With that observation out of the way, let's take a look at the monthly Census report on Shipments, Inventory and Orders for February.
New orders for manufactured durable goods in February decreased $4.2 billion or 1.6 percent to $250.6 billion, the U.S. Census Bureau announced today. This decrease, down following three consecutive monthly increases, followed a 0.1 percent January increase. Excluding transportation, new orders increased 0.1 percent. Excluding defense, new orders decreased 1.9 percent. Transportation equipment, also down following three consecutive monthly increases, drove the decrease, $4.3 billion or 4.8 percent to $86.0 billion.
Shipments of manufactured durable goods in February, up three of the last four months, increased $0.5 billion or 0.2 percent to $258.6 billion. This followed a 0.4 percent January decrease. Computers and electronic products, up four of the last five months, led the increase, $0.3 billion or 1.1 percent to $28.0 billion.
Unfilled orders for manufactured durable goods in February, down four of the last five months, decreased $3.6 billion or 0.3 percent to $1,177.6 billion. This followed a 0.1 percent January increase. Transportation equipment, also down four of the last five months, drove the decrease, $3.8 billion or 0.5 percent to $807.2 billion.
Inventories of manufactured durable goods in February, up twenty‐five of the last twenty‐six months, increased $1.3 billion or 0.3 percent to $418.9 billion. This followed a 0.5 percent January increase. Transportation equipment, up five of the last six months, drove the increase, $1.3 billion or 1.0 percent to $134.1 billion.
Nondefense new orders for capital goods in February decreased $5.0 billion or 6.3 percent to $74.5 billion. Shipments increased $0.5 billion or 0.6 percent to $78.9 billion. Unfilled orders decreased $4.4 billion or 0.6 percent to $705.7 billion. Inventories increased $0.5 billion or 0.3 percent to $183.6 billion. Defense new orders for capital goods in February decreased $0.4 billion or 3.4 percent to $12.2 billion. Shipments decreased $0.7 billion or 5.3 percent to $12.3 billion. Unfilled orders decreased $0.1 billion or 0.1 percent to $156.0 billion. Inventories decreased less than $0.1 billion or virtually unchanged to $22.9 billion.
Econoday has a good writeup today.
However strong yesterday's ISM report for March was, today's durable goods report for February shows more weaknesses than strengths. Reflecting an expected cooling for aircraft, durable goods orders fell 1.6 percent with the ex-transportation reading also very near expectations, at a very thin 0.1 percent gain. Orders for core capital goods did not meet expectations, slipping 0.1 percent which is below Econoday's consensus range.
Shipments of core capital goods (nondefense ex-aircraft) are also soft, coming in unchanged but following a 1.0 percent surge in January. Yet the lack of new core orders as well as a third straight 0.3 percent draw in unfilled core orders do not point to strength for March shipments. Weakness in core capital goods shipments will limit expectations for first-quarter business investment.
Total unfilled orders also fell 0.3 percent in February and continue to trend just underwater. Lack of backlogs may well slow what has been strong growth in manufacturing payrolls. Inventories are showing bloating in some data but remain tame in manufacturing, up only 0.3 percent in February and against just a 0.2 percent rise in shipments that leaves the inventory-to-shipments ratio unchanged at 1.62.
The tone of Econoday was on the mark today for a change. There has been far too much volatility in these numbers to point out a case for strength or weakness.
The reports are volatile mainly because of transportation orders that can skew even year-over-year comparisons.
One trend to watch is the decline in unfilled orders which will impact hiring plans.
Core capital goods orders have also been weak. They are a measure of business investment and thus future production plans.
Mike "Mish" Shedlock