Durable goods orders increased more than estimated in February, thanks to a second consecutive surge in orders for commercial aircrafts and more demand for electrical goods and appliances.

The Commerce Department reported an overall 1.7 percent increase in durable goods orders, and an upward adjustment to 2.3 percent for January’s number, both of which were largely due to aircraft orders.

New orders for durable goods excluding transportation – a more accurate indicator of demand – grew by 0.4 percent in February. It was the sixth consecutive increase, showing a continued positive trend in demand, particularly for electrical equipment, appliances, and components. New orders for this category witnessed its largest uptick in seven months.

“Business has gotten better,” said Len Harris, the owner of Len Harris Appliances in Flushing, NY. Harris says the sales growth has been across the board for the products he carries, ever since November. “I think there was a lot of hesitation on the part of the consumers with what the outcome of the election would be. There’s a little more confidence from the consumers now.”

Manufacturers are also more optimistic since the election. President Trump’s promises to reduce taxes for businesses, repeal a number of business regulations, and invest in infrastructure and defense are all positive signs for the industry’s productivity.

In his budget plan for 2018, President Trump proposed $54 million more spending for the military – the most significant increase in five years. If it is approved, the spending would expand overall durable goods orders significantly and benefit the economy, but it would do little to strengthen the private business sector.

Non-defense durable goods orders are a better indicator of industrial output. These orders have been gradually boosting for three months now, signaling an improvement in manufacturing activity and factory jobs without significant defense spending.

The report came out on the same day as a vote to repeal the Affordable Healthcare Act – another promise that President Trump made to his voters during the campaign. The vote was called off due to a lack of support from the Republican party, who the president was depending on to make good on his promises.

The hesitation from GOP lawmakers to side with Trump might dampen manufacturer confidence, or at least make them more cautious, as they wait for concrete evidence that the taxes, regulations, and infrastructure, and defense spending will be acted on.

However, a number used to calculate gross domestic product, shipments of nondefense capital goods excluding aircraft, or core capital goods, went up to $64 billion in February, and will probably continue to grow as current orders come in.

“The level of core capital goods orders is running a little bit ahead of shipments, so we should see core capital shipments pick up in the next couple of months,” said Ryan Sweet, the director of Real Time Economics at Moody’s Analytics.

The 1 percent increase of shipments of core capital goods will help to offset the .3 percent decline from January in calculating the gross domestic product, and the growth will persist as shipments continue to pick up.

Core capital goods, a number used to gauge business investments, decreased by a slight .1 percent in February. It was the first decrease since Sept. 2016, after February’s report adjusted January’s .1 percent decrease to an increase.

“It’s a little bit puzzling what’s driving that increase [in new orders for core capital goods],” said Omair Sharif, a senior U.S. economist at Société Générale. “If you actually break it down you can see where it’s coming from. Over the last six or seven months, it’s been the machinery category that’s been helping to drive a fair bit of those gains. That pre-dates the election.”

Shipments for machinery went up in February, and orders have been up since June 2016. The consistency can be attributed to higher oil prices, which peaked in May after a historic low in February. Higher oil prices allow oil companies to make a profit and afford the machinery required to drill.

“All in all, I think equipment investment is on track for a very good first quarter, and things are setting up for solid growth in the second quarter as well,” said Mr. Sweet.

Comments are closed.