Durable goods orders declined slightly in February as global supply chain issues lingered and inclement weather pushed the manufacturing industry’s steady recovery off track. 

New orders for durable goods – items with a life expectancy of at least three years – declined 1.1%, according to the Department of Commerce. This is the first decrease since April 2020 after nine consecutive monthly increases. 

Even though most durable goods declined in February, core capital goods orders rose by 5.6%, unfilled orders increased by 0.9% and inventories increased by 0.2% from January. The rise in these components signal that business investment remains strong and that the overall economy is still on track for a strong recovery. 

“It’s hard to be too disappointed given the fact that we had such strong gains for such a long period of time,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. “Even though the numbers were weaker than expected, I think in the big scheme of things the sector is still quite robust.”

Part of the decline in February was a result of the snowstorm that swept across the country which forced manufacturing companies to close and added to the total number of unfilled orders. But the larger trend that may impact volatility in the future are shortages of semiconductors and plastic materials as global supply chain issues continue to mount. This is affecting manufacturers of motor vehicles and electronics in particular and will likely continue as long as the COVID-19 pandemic continues to be a global problem. 

“The U.S. cannot resolve those supply chain issues on its own. It needs other countries to get a firm handle on the COVID situation in their respectives economies and that should then facilitate the gradual easing of these supply chain issues, which will allow those impacts that are felt here at home to slowly ease too,” said Oren Klachkin, lead U.S. economist at Oxford Economics. 

The supply constraints were highlighted by the number of new orders and shipments of motor vehicles and parts, which decreased 8.7% and 8.9% respectively. While auto manufacturers are dealing with semiconductor shortages, smaller businesses like Gary Wille’s Auto & Tire Center in Oregon, Wis., have been struggling to find quality tires for their customers as more people have decided to invest in maintaining their older vehicle rather than in a new car altogether. 

Tyler Payne, a service manager at the auto repair center whose father owns the business, said his usual vendors don’t have as many tires available lately and has been forced to give customers lesser-quality tires as a result. But despite the shortage of quality tires, the pandemic has resulted in strong growth for the family business. 

Payne credits the uptick in service to most people being home and not needing their car on a regular basis because of the pandemic. With more people set to receive $1,400 stimulus checks as a part of President Biden’s American Rescue Plan, Payne is expecting even greater demand in the weeks to come.  

“Last year we had our best year by over 10% compared to the year before,” said Payne. 

As stimulus checks flow and more vaccines get administered, the country gets closer to operating at full capacity and boosting the economy. The economy will shift as consumer spending pivots back to services as restrictions ease and durable goods orders will soften as a result. But overall, most economists believe the momentum behind the economy will continue to propel durable goods orders in the future and cement February’s numbers as a temporary blip. 

“If I were concerned that this was indicative of a change in the trend, then I would be a little more worried. In my mind, I’m going to chalk it up to special factors and statistical noise and look forward to getting back to the positive side in March,” said Stanley. 

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