Manufacturing activity will continue to grow in the January to March quarter, with February durable goods orders clocking in with the biggest increase in the last five months.
The Commerce Department announced Tuesday that the durable goods orders for February increased 5.7 percent with the transportation sector leading the way. An increase in airplane sales propelled the rise, and smaller consumer products, like computers and appliances, also saw an increase.The increase followed a 3.8 percent January decrease.
“It’s a very strong run, even compared with periods before the recession,” said Andrew Grantham, an economist at CIBC World Markets. Grantham had expected the increase in aircraft orders but was surprised by the strength elsewhere.
Airplane manufacturer Boeing, which has been plagued by mechanical problems due to its 787 Dreamliner, still sold hundreds of planes in February, including 16 units to Iceland Air, in a deal valued at more than $1.6 billion, and 175 new airplanes to Irish airline Ryanair for $15.6 billion.
The sales come as airlines across the country raise their profit outlook for 2013, eas revenue projections increase to $671 billion from the previous number of $637 billion.
In addition to transportation, smaller consumer products, such as computers, sold well in February in an increase of 1.3 percent. “Orders in general are improving, relative to what was a soft spell mid-year last year,” Grantham said.
Courtney Elby, 33, of Morgan Hill, Calif., bought a computer and new oven last month.
She bought a laptop before starting a new job, and a tabletop oven after downsizing to a smaller house.
Sales of durable goods are strong at New York electronics retailer P.C. Richard & Son in New York City.
“In the last couple months we’ve been up in laundry, ranges and laptops. We’ve been down on MP3 players, housewares and blenders,” said manager Zunayed Mahfuz. In the last year his store has been recovering well from the recession, with stove ranges up 78 percent, dishwashers up 24 percent and computers up 40 percent.
He thinks the sluggish sales numbers on smaller appliances is due to the lack of discount promotions aimed at moving those products off the shelves. He said that next month the store will offer a 5 to ten percent discount on those products to increase sales.
Economists say that customers who buy larger items can be expected to supplement those appliances with smaller purchases like the housewares and blenders Mahfuz plans to offer on sale next month.
“People who are buying big pieces of durable goods are followed by smaller pieces like electrical equipment and appliances. It’s usually in the second stage in investment that you see those purchases,” said Grantham, and predicted a positive outlook for small appliance sales.
He said that manufacturing and capital spending may not see too much of a boost in the months ahead, but it will be positive for the U.S. and better than what was the case around middle of last year. The next month will look weak due to a slowing of airplane orders, and only small gains are expected in durable goods orders.
Mahfuz is feeling positive at his store, and said he is looking forward to summer sales.
“The a/c units are coming in next week so we’re hopeful,” he said.
