New Orders of Manufactured Durable Goods Increase 3% to Close 2011, While Spending Remains Modest

---

Researched by Industrial Info Resources (Sugar Land, Texas)--2011 was an interesting year for the United States economy. There was considerable instability on Wall Street thanks to lackluster solutions to the unemployment problems in the U.S., a sluggish economic recovery and a weak housing market. In addition, the European debt problems caused occasional tremors throughout the financial community. Industrial spending continued to rebound post-recession, but significant increases in jobs remained elusive for the majority of the year. New orders of durable goods were up and down throughout the year, but did manage to end the year on a positive note, increasing 3% in December.

Following the adjustment of November's orders number, the economy ended the year on an upswing, as durable goods orders have increased for five of the last six months. In December, this increase translated into a $6.2 billion increase in orders. The primary metals sector, machinery sector and transportation equipment sector drove the increase in orders in the final month of the year. New orders for primary metals increased 5.1% for the month while machinery orders rose 6% and the always volatile transportation equipment sector saw its orders climb 5.5%, thanks to an 18.9% increase in nondefense aircraft and parts orders.

Shipments of durable goods continued to climb as well, increasing for two of the final three months of the year. Shipments rose 2.1%, or $4.3 billion, in December, which significantly improved on November's 0.3% increase. The primary metals sector, the machinery sector and the communications equipment sector were the largest gainers in shipments for the month. The communications equipment sector saw its shipments increase 9.6%, while the primary metals sector saw increases of 8.2% and the machinery sector increased its shipments by 4%.

Unfilled orders of manufactured durable goods as well as inventories of manufactured durable goods continued their recent climbs. Unfilled orders, which have increased for 20 of the last 21 months, increased 1.5%, while inventories, which had been on the rise for 24 consecutive months, once again increased, even if only by a modest 0.3%. The prime movers in these two key indicators were the machinery sector, which saw its unfilled orders increase 2% and its inventories increase by 0.4%, and the transportation equipment sector, which had its unfilled orders rise by 2.1% and its inventories increase 1.5%.

On the spending side of the economic equation, only $10.4 billion of industrial projects began construction activities in the final month of 2011, but this slow industrial construction month was not entirely unexpected, as weather typically curtails construction efforts in most parts of the U.S. The West Coast market region saw the highest amount of expenditures for the month, with $2.4 billion worth of projects beginning construction, while the Great Lakes region saw the largest number of projects and the second-highest total expenditures, with 142 capital or maintenance projects worth an estimated $2 billion beginning construction in December.

The majority of the work that did occur in December came out of the Power Industry, which saw 24 capital or maintenance projects worth an estimated $5.1 billion begin construction activities in December. The Industrial Manufacturing Industry contributed another $2.4 billion worth of construction starts for the month and had the highest concentration of project activity, with 239 capital or maintenance projects beginning. This high number of projects was not entirely unexpected, as many of the plants within the Industrial Manufacturing Industry utilize the traditional Christmas break time frame to perform semi-annual or annual maintenance programs at their facilities.

Overall, the year ended on a very positive note. New orders have been on the rise for most of the last half of 2011, and industrial spending for the year increased from 2010. While most would hope for a higher rate of increase in the new orders numbers, given the overall economic instability and the fact that the country is entering an election year, positive movement in the right direction is a good way to end the year.

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.