The following is an analysis from Cliff Waldman, Senior Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the durable goods report for March 2012:
“The disappointing March durable goods report adds to mounting evidence that the U.S. economy ended what appeared to be a promising first quarter on a weak note,” Waldman said. “Total new orders for long-lasting goods slid by an alarming 4.2 percent. Excluding the volatile transportation category, orders fell by 1.1 percent, the second significant drop in the past three months. Capital spending continues to weaken. New orders for non-defense capital goods excluding aircraft, a well-accepted gauge of business equipment demand, fell by just under 1 percent, also the second drop in three months.
“More disconcerting than the aggregate data is the broad-based weakness across key industry sectors,” Waldman added. “Primary and fabricated metals as well as machinery and computers all experienced significant declines in orders activity. Metals demand is an important harbinger for the factory sector in that these industries provide inputs for a wide range of manufacturing supply chains. The declines in machinery and computers demand reinforce the notion of slowing capital spending both in manufacturing and across the broad economy.
“The historically mild winter added to the challenge of interpreting economic activity for the first quarter of 2012,” he concluded. “Nonetheless, disappointing reports on jobs, durable goods demand, manufacturing output, and housing suggest that whatever strength the U.S. economy had going into 2012 is waning. Persistent sluggishness in U.S. economic activity and a growing list of global concerns—including a deepening recession in the Eurozone and a sharp slowdown in emerging markets— have begun to take their toll on the U.S. manufacturing sector, whose growth is now moderating from the relatively strong pace of recent years.”