New orders for durable goods increased 2.2% in February

 
Implications:  New orders for durable goods were up a solid 2.2% in February, showing broad gains across many categories. Orders are up 12.2% in the past year, 8.5% excluding transportation. And remember, this is all in the very early stages of a home building recovery. As housing picks up steam, orders for durables should pick up as well. As a result, we expect more gains in the year ahead. Orders for "core" capital goods, which exclude aircraft and defense, have been running consistently above shipments for the past two years. Unfilled orders for core capital goods are at a new all-time record high and up 9.5% from a year ago. Meanwhile, monetary policy is loose, interest rates are extremely low, and businesses are reaping record profits while they already have record amounts of cash on their balance sheets.  Moreover, capacity utilization at US factories is approaching its long-term norm, meaning companies have an increasing incentive to update their equipment. In other recent news on the factory sector, the Richmond Fed index, which measures manufacturing activity in the mid-Atlantic states, declined to +7 in March from +20 in February.  The index has been in positive territory, signaling growth, for the past four months.  On the housing front, pending home sales, which are contracts on existing homes, slipped 0.5% in February but are up 13.9% versus a year ago. The Case-Shiller index, which measures home prices in the 20 largest metro areas, was unchanged in January (seasonally-adjusted).  Nine of the twenty metro areas had price increases.  Home prices in Phoenix, which led the pack in January with a 2% increase, are up at a 17.6% annual rate in the past three months.  Nationwide, home prices are down 3.8% from a year ago, but we expect a slight increase over the full course of 2012. 

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Posted on Wednesday, March 28, 2012 @ 9:46 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.