New Orders for Manufactured Durable Goods in U.S. Reverse Course in February

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SUGAR LAND--March 30, 2012--Researched by Industrial Info Resources (Sugar Land, Texas)--New orders for manufactured durable goods in the United States ended 2011 on a roll. Orders increased for each of the last four months of the year, and the outlook for 2012 was bright. However, in January there was a slight stumble as those orders decreased by 3.6%. Industrial spending remained high at the beginning of the year, but the post-holiday blues appeared to have hit the durable goods sector. Things have reversed themselves in February, with industrial spending declining and new orders for manufactured durable goods dusting themselves off after their slip and rising once again.

New orders increased 2.2% in February, according to the U.S. Census Bureau, thanks to gains in several key sectors. The primary metals, machinery, computers and electronic products, and transportation equipment sectors all posted gains during the month. The machinery sector saw the most growth, with a 5.7% increase, while the always volatile transportation equipment sector, thanks to a 12.5% increase in defense aircraft and parts orders, increased 3.9%. The primary metals sector saw modest growth at 1.3%, and the computers and electronic products sector saw its orders increase 2.7%.

Shipments of manufactured durable goods saw a slight decrease for the month, dropping 0.4% after two consecutive months of gains. Unfilled orders continued to increase, rising 1.3%, after seeing increases in 22 of the last 23 months, and inventories, which had increased for the last 26 months in a row, continued to increase, posting a 0.4% gain in February.

The majority of the sectors posted only modest shipments growth in February, with the largest gains seen in the machinery sector, which grew 2.3%. The machinery and transportation equipment sectors saw the highest growth in terms of unfilled orders, with 1.8% and 1.6% growth, respectively, while most sectors only saw modest growth. Inventories grew in most sectors, with the highest growth seen in the primary metals sector at 1.3%.

Industrial spending took a dip during February, after posting $14 billion in construction starts in January. Only $8.2 billion worth of industrial projects began construction activity in February. While this is still significant growth given the time of year, with the winter being milder than expected, more spending was anticipated. The total spending numbers should increase significantly as the spring months continue, peaking during the summer when the weather is traditionally most forgiving to construction.

Spending was more focused in February, with the majority of the work taking place in the Southern states. The Southwest region of the country led the way, with 82 projects worth an estimated $3.3 billion beginning construction. The Southeast region was the second-highest spending region for the month, with 52 capital or maintenance projects worth an estimated $1.6 billion beginning construction, while the West Coast region contributed $1.1 billion to the total spending.

Four industries stood out when it came to investment in February: the Power Industry, the Oil & Gas Production Industry, the Oil & Gas Transmission Industry and the Industrial Manufacturing Industry. The Power Industry, traditionally a major spender, saw $1.7 billion in construction starts in February in the form of 47 capital or maintenance projects. The Oil & Gas Production Industry was a close second in total spending, with nine projects worth an estimated $1.5 billion taking place, while the Oil & Gas Transmission Industry added $1.2 billion. The Industrial Manufacturing Industry was the final industry to break the $1 billion barrier, with $1.1 billion in total construction starts for the month.

Overall, February was almost a take-it-or-leave it kind of month. Durable goods orders recovered somewhat, but spending took a significant dip. Hopefully, in the coming warmer months, both indicators will see a significant boost. The national economy is doing well, despite high oil and gas prices, and companies are investing in their facilities, which should help increase durable goods orders in the coming months. More consistency is expected in the coming months in both of these indicators, and the possibility of that occurring is strengthening.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.