The US Commerce Department will publish its March durable goods advanced report Tuesday at 8:30 a.m. EST. Economists are spread wide on what they expect to see since February’s report was the first significant decline in more than a year. Here’s what to watch for:
- Slow growth and possible recession
While there is optimism for a fairly decent report, the last surge of stockpiling that companies did was toward the end of 2021. Lindsey Piegza, managing director and chief economist at Stife Nicolaus & Co, said the Fed raising rates puts the economy not only at risk of choking off domestic growth, but also the possibility of falling into a recession.
- Is manufacturing keeping it hot while other sectors cool off?
Other reports that track the consumer price index of goods and service, and personal expenditures show a slight decline in demand, likely due to increased inflation, the Russian invasion of Ukraine and higher gas prices. Tim Quinlan, senior economist at Wells Fargo Securities, said that’s not the case in manufacturing. That sector continues to have really strong demand but the problem is there’s insufficient supply, raw materials and labor.
- Russia’s invasion could drive up energy costs, affecting manufacturing
Energy and agriculture are likely the most impacted areas due to the international conflict occurring in Ukraine. If companies are concerned about their declining demand profile, Piegza said businesses are less likely to invest upfront. “It’s really going to be a good indication of where money is going, where confidence is in the manufacturing sector and the level of business investment that we’re seeing.”
- Jobs in manufacturing rising
Manufacturing consistently added jobs in the past two months, and are expected to add more in April, but employment is still down. “I think we’d be hiring a lot faster if the pool of available labor and the participation rate were sufficient for what they were looking for,” Quinlan said. There is high turnover and a difficulty to fill positions even though more and more jobs are being added; 76,000 combined in February and March.
- Better brace for some volatility
There’s a double-edged sword for companies working to find a balance between increasing their inventory to make sure they have enough supply to meet demand, and not overstocking which would lead to a loss of business investments if no one is buying at the higher prices due to inflation. Piegza said businesses have a heightened level of sensitivity in terms of inventory and product management.