Last month, orders for U.S. durables goods beat the forecast. This is a good sign for the U.S. economy as it shows that companies have a more confident outlook for the economy.
Commerce Department data showed that durable goods booking rose by 1.7%. The median forecast of economists surveyed by Bloomberg was 1.4%. Durable goods are goods that can last a minimum of three years.
This gain is the 6th straight. This can boost aggregate demand and create more economic growth. The Commerce Department said that the value of last month’s orders for durable goods is $235.39 billion. Also, the data from Commerce Department showed that fixed nonresidential investment had increased slightly but consistently for the past three-quarters.
Should the Trump administration be successful in trimming down corporate taxes and lessening regulations, this statistic has the potential of increasing even more. However, it still faces its first hurdle in getting a healthcare bill passed in Congress.
Transportation equipment demand is often excluded due to its volatility, and when excluded, orders increased 0.4%. However, bookings for non-defense capital goods which excludes aircraft dropped by 0.1%. Economists had forecasted it would increase by 0.5% and in January, they revised their forecast to 0.1%.
Peter Boockvar, chief market analyst at Lindsey Group, said, “…for all the optimism seen in the business confidence figures, there was little sign of that translating into an increase in capital spending in February.”
Last month, shipments of capital goods increased by 1%. This statistic is used in the calculation of gross domestic product. Shipments of capital goods exclude aircraft and military hardware. Bookings for civilian aircraft surged 47.6% last month. Boeing Co. reported 43 orders for aircraft last month. Boeing had 26 orders in January.
Increases in orders were also noted for electrical equipment, computers and electronic products, appliances and components and fabricated metal products.
However, there was a 0.8% drop in orders for motor vehicles and parts. The reason for this is the high inventory in the automobile industry. February figures for car sales in February had little changes.
In 2015 and 2016, the U.S. industrial sector was weak because of low oil prices which hindered their domestic energy industry while the strong dollar diminished demand for U.S. exports.
Despite improving economic conditions, things are expected to have slowed down in the winter months. Fed Bank of Atlanta estimated gross domestic product to have only expanded 0.9% in the first quarter. Last quarter’s gross domestic product was 1.9%.
Macroeconomic Advisers, a forecasting company, estimated gross domestic product growth in the 1st quarter to be 1.2%.
Fed Chair Janet Yellen said, “I think it is fair to say that many of my colleagues and I note a much optimistic frame of mind among many, many businesses in recent months. However, I would say most of the businesspeople that we have talked to also have a wait-and-see attitude, and are very hopeful that they will be able to expand investment and are looking forward to doing that, but are waiting to see what will happen.”