The following is an analysis from Daniel J. Meckstroth, Ph.D., Vice President and Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the durable goods report for April 2012:
“Durable goods orders increased 0.2 percent in April according to the Department of Commerce’s report. However, when defense goods and aerospace orders are removed from the total, nondefense capital goods orders excluding aircraft declined 1.9 percent in April after dropping 2.2 percent in March; a 2.9 percent gain was posted in February,” noted Meckstroth. “Durable goods orders are extremely volatile and have to be averaged out over many months, and not just one. In the first four months of 2012, nondefense capital goods orders excluding aircraft were up 7.8 percent above the same period one year ago.
“Durable goods orders in 2012 are growing at a moderately strong pace that is much faster than that of the general economy,” Meckstroth added. “The machinery and motor vehicle industries’ factories in particular are operating with factory usage rates well above the utilization rates in December 2007, before the recession began. We believe there is pent-up demand for motor vehicles and capital goods because much investment was postponed during the recession. High operating rates in manufacturing, new job creation, and low interest rates are conducive to capital spending. When the year-to-date performance of durable goods orders is put into the context of the very modest growth in the overall economy, the activity in heavy machinery and equipment is seen as a growth leader.”