The numbers: U.S. orders for long-lasting durable goods rebounded in March after a poor showing in the prior month, but shortages of key supplies are still hampering manufacturers as they race to keep up with rising demand from customers.
Orders for durable goods rose 0.5% last month, the government said Monday. These are products such as electronics, appliances, machines, cars and other transportation equipment meant to last at least three years.
Economists surveyed by Dow Jones and the Wall Street Journal had forecast a 2.2% increase.
Orders would have been three times stronger in March, however, if not for a sharp drop in bookings for commercial and military aircraft.
Orders had decline in February for the first time since the pandemic began, mostly because of unusually harsh winter weather and a sharp drop in auto production owing to a shortage of key computers chips.
Yet one problem few companies face is a lack of demand.
The U.S. economy has sped up after another massive federal stimulus and a decline in coronavirus cases. By virtually every measure, demand for a host of manufactured goods are on the rise and there’s unlikely to be any letup in the foreseeable future.
What happened: Orders for new cars and trucks increased 5.5% in March after slumping more than 9% in the prior month. Semiconductor shortages are still constraining production of some models, but automakers have managed to keep their assembly lines going.
In a surprise, the government reported that orders for commercial airlines sank 47% last month. Boeing
actually boasted 196 new orders in March, more than offsetting 156 cancellations.
The discrepancy strongly suggests orders for durable goods in March was stronger than the official U.S. Census number. Figures produced by Boeing and the government don’t always align with each other from month to month.
Orders for military fighter planes and other defense aircraft also plummeted 20% last month.
If transportation is excluded, new orders rose 1.6% in March
Elsewhere, orders rose for primary metals, fabricated metal parts and machinery in a sign of broad demand. These products are used in an array of goods for retail and business customers.
A key measure of business investment, meanwhile, also rose 0.9% in March. These are known as core orders and exclude defense and transportation.
Business investment had fallen in February for the first time since the pandemic, but the decline was seen as temporary given the strength of the economy.
Big picture: Manufacturers have led the U.S. economic recovery since last year and by all indications they are gaining fresh momentum.
Their biggest obstacles are shortages of key supplies, a lack of skilled labor and rising prices for raw materials. If prices rise high enough, that could mean higher prices — aka inflation — for customers too.
What they are saying? As the economy reopens more broadly, industrial activity will continue to be propelled by strong tailwinds including large fiscal stimulus, buoyant demand, and strong corporate profits,” said lead U.S. economist Lydia Boussour of Oxford Economics. “These should more than outweigh ongoing headwinds from stretched supply chains and the global semiconductor shortage.”