By Lucia Mutikani
WASHINGTON (Reuters) -Orders for long-lasting U.S. manufactured goods unexpectedly rose in February as businesses rushed to place orders for
primary metals and fabricated metal products ahead of tariffs.
The report from the Commerce Department on Wednesday also showed an increase in shipments of capital goods, suggesting that business spending on equipment rebounded in the first quarter. But rising economic uncertainty because of import duties continues to cast a shadow over manufacturing.
President Donald Trump has announced a raft of levies on imports. Some of the duties have been delayed until April. Economists have warned that the nature in which the tariffs are being handled was not supportive of economic activity.
“There is tremendous uncertainty coming from Washington, but companies are not just holding their breaths waiting for the other tariff shoe to drop, they are actively ordering up more equipment to beat the price increases once the trade war sanctions jack up the cost of the goods and materials they need to even higher levels,” said Christopher Rupkey, chief economist at FWDBONDS.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, increased 0.9% after advancing an upwardly revised 3.3% in January, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast durable goods orders falling 1.0%.
Primary metals orders increased 1.2%, adding to January’s 1.9% surge. Orders for fabricated metal products rebounded 0.9%. Electrical equipment, appliances and components orders rose 2.0%. Economists attributed the increase in orders for these goods to front-loading ahead of tariffs.
Orders for machinery climbed 0.2% after being unchanged in the prior month. Orders for transportation equipment advanced 1.5% after accelerating 10.2% in January.
They were lifted by a 4.0% rebound in demand for motor vehicles and parts and 9.3% rise defense aircraft.
WEAK COMMERCIAL AIRCRAFT ORDERS
That more than offset a 5.0% decline in commercial aircraft orders. Boeing reported on its website that it had received only 13 aircraft orders in February compared to 36 in January.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.3% after an upwardly revised 0.9% surge in January. Economists had forecast these so-called core capital goods orders gaining 0.2% after a previously reported 0.8% jump in January.
Shipments of core capital goods rebounded 0.9% after falling 0.2% in January. Non-defense capital goods orders declined 1.5% after accelerating 12.8% in January. Shipments of these goods rose 0.5% after vaulting 3.2% in the prior month.
Core and non-defense capital goods shipments go into the calculation of the business spending on equipment component in the gross domestic product report.
Business investment in equipment contracted in the fourth quarter, partially offsetting robust consumer spending.
Growth estimates for the January-March quarter are mostly below a 1.5% annualized rate and the odds of a contraction are high. The economy grew at a 2.3% pace in the fourth quarter.
“Machinery & equipment investment is on track to rebound this quarter, albeit not by enough to prevent a sharp slowdown in overall GDP growth,” said Stephen Brown, deputy chief North America economist at Capital Economics.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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