Orders for durable goods are likely to rise for March, following a decline last month.
Durable goods, products that are designed to last more than three years, will see a rebound in orders as activities recovers from severe weather conditions and slowdown at west coast ports.
Forecasts of durable goods orders by economists in the Bloomberg survey ranged from a 1.5 percent drop to a 2.3 percent increase. The median consensus of around 80 economists surveyed by Bloomberg said durable goods orders might increase 0.6 percent.
The slowdown at the ports had a dampening effect on the manufacturing activity because it interrupted the supply chains and in turn also slowed down the manufacturing process. Manufacturers found it difficult to ship the goods abroad, which in turn slowed down the manufacturing activity and the orders.
“Often aircraft orders add volatility to the series,” said Michael Moran, chief economist, Daiwa Capital Markets. “I think there’s a better chance of upside volatility rather than downside volatility in the aircraft category.”
He predicts orders for aircraft will be more in March.
The strong dollar is still a factor similar to last month, slowing exports and boosting imports. It has an influence on the manufacturing sector and order flows but the effect will gradually show up over a period of time and is hard to point its effect on a single month.
Durable goods comprise big-ticket items in the factory orders and if there is even a minute change in the number of orders of big-ticket items, it translates into a huge shift in durable goods orders. Therefore, durable goods orders lend itself to being a volatile report because there are many big-ticket items in this sector and often big swings are seen from one month to the other.
“There’s a lot of random volatility in the monthly numbers and month to month changes,” said Moran. “I think in most cases its going to be the random volatility that will have more an effect on the numbers than the gradual influence of the stronger dollar.”
Some economists have predicted a lackluster growth in the first quarter and lowered the estimates but are optimistic of a strong rebound when weather conditions improve.
The severe weather conditions and low temperature were reminiscent of last year’s lackluster growth in the first quarter. The economy contracted at a 2.1 percent annual rate in the first three months in 2014 and rebounded in the next three quarters.
“I do think in the second course there should be some improvement in the manufacturing sector,” said David H Sloan, of 4Cast Inc. “The strong dollar is weighted on export so I don’t think the manufacturing sector would be one of the strongest sectors of the economy.”