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Aircraft Demand Lifts Durable Goods Orders

After two straight months of decline, February showed that the order for durable goods order grew by 2.2 percent.  The main source for this growth was due to the strong demand for commercial airplanes.  According to the Commerce Department, US commercial aircraft orders rose by 13.6 percent and defense orders rose by 13.5 percent.  In addition to aircrafts and defense orders, orders for motor vehicles and parts rose by 3.6 percent.

Despite this, the growth of durable goods overshadows a slippage in investment from January.  The orders for core capital goods category, or non-defense capital goods excluding aircrafts, fell by 1.3 percent after rising in January.  The core capital goods category is important because it is considered a barometer of business.

The information about the durable goods growth experienced in February have influenced the way economists predict their first quarter GDP forecast.  Economic growth in the first quarter is expected to slow down from the fourth quarter’s annualized 2.4 percent rate because of the unseasonably cold weather and an effort by business to work through a pile of unsold goods.  Some economists also trimmed their forecast of first quarter business investments based on the durable goods data.  However, they are holding their overall GDP forecasts steady due to an increase of 0.8 percent in durable goods inventories in February.  In the end, the increase in orders for durable goods gives a small snippet of our economy, but other factors need to be explored to get the full picture.