Durable goods orders weakened 2.2 percent from January 2022 – February 2022. Photo Credit: Deposit Photos

Durable goods orders decreased in February following four consecutive months of increases, which is likely due to the lingering effects of the omicron variant, but experts say there’s no cause for concern, yet.

New orders for durable goods – products that have a lifespan of three years or more – declined 2.2 percent. Excluding the volatile transportation component, new orders weakened by 0.6 percent, which is in line with what economists expected.

“There were companies who were forced to cease production for a few weeks because people were out sick, but luckily that didn’t last too long,” said Christopher Low, chief economist at FHN Financial.

With coronavirus cases sliding in the U.S., the future of durable goods orders may depend on the consequences of the Russian invasion of the Ukraine. Stephen Gallagher, chief economist at Societe Generale said the crisis in the Ukraine may have made businesses more cautious although the overall effect should be limited.

“Unlike Europe, we are not affected the same way because we don’t trade with them as much in anything that would affect durable goods,” said Gallagher.

It is possible the decline is merely a one month fluctuation. For example, private sector orders were strong, but the usually healthy sector like communications equipment was not.

Also perplexing was the February decline of the 0.5 percent fall in new orders for cars while consumer demand remains high. This may be explained by the Canadian trucker blockades that happened through most of the month. Automakers who were already suffering from semiconductor shortages, were hit even harder by the protests locking valuable inventory behind the other countries border. The pipeline between Detroit, Mich., and Windsor, Ontario, accounts for nearly a third of trade between the two countries.

Meanwhile, supply shortages continue to vex businesses. Kristen Rhee, owner of Cat & Bug Designs, an online wholesaler and boutique sticker and custom mug designer, nearly had to pause new orders when she ran into supply chain issues and out-of-stock items she needed to create her products.

“Up until maybe January, I was buying the jar glasses I use in the production of my custom drinkware directly from Libbey,” Rhee said. “When I went to place a new order, the website said it was out of stock. I waited a week or so, but they hadn’t come back in. I couldn’t wait any longer. I had wholesaler orders coming in and no product to create.”

Libbey is one of the largest glassware manufacturers in the world and is used by everyone from foodservice providers to homeowners. Before the tumbler glasses went out of stock on their website, Rhee was able to buy 48 mugs for $250 at a time. The glasses are still out of stock. As her business continued to receive orders, she found herself at a crossroads. 

Like other small business owners she turned to Amazon, but the quality was low, the cost high and the lead time was causing her customers to wait which was hurting her business. After weeks of research, she found a new manufacturer through AliBaba – a tech company specializing in e-commerce, retail, internet and technology – who had the Libbey glasses that would maintain the quality her customers expected. Having to buy glasses, lids and straws separately became simpler which saved her money and time in the long run.

“The diminished margins were going to cause me serious issue, but I got lucky and came out on top,” Rhee said. “It turned out to be much easier for me because I can replenish all of my inventory at once from this one manufacturer for the same price I paid Libbey for just the glasses.”

Although economists discounted the importance of February’s decline, they are watching the next few months closely.

“We can start worrying if the same continues into March and April,” Low said. “Right now all we can do is watch and wait.”

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