Updated 12:15 p.m. EST. Orders and shipments for durable goods and shipments posted a healthy increase in January, indicating the struggling manufacturing sector may soon be headed for a recovery.

The U.S. Commerce Department reported new orders during January increased $4.6 billion, or 2.6%, to $179.1 billion. This follows a 0.9% December increase. Shipments of durable goods in January increased $5.3 billion, or 2.9%, to $186.1 billion. This follows a 0.8 percent December increase. Both numbers are still below levels reported for January 2001.
Inventories for durable goods in January, down 12 consecutive months, decreased $1.6 billion, or 0.6 percent, to $281.3 billion. This follows a 1% December decrease.
Newport Communications Senior Economist Jim Haughey says every sector for durable goods orders and shipments was up except telecom equipment, which he says has unique inventory surplus problems and sells to buyers with serious financial problems.
“Shipments gains ahead should average under 1% a month. January had several sources of temporary boosts. Auto shipments were to refill dealer lots after zero financing loans cleaned them out last fall. Dealer sales are declining slightly, although they are still high. Aerospace shipments included some replenishment of military rockets and aircraft stocks. Few of these have been used or lost for about 10 weeks.”
Haughey says the best news in January's report was the 6% rise in industrial equipment shipments. This is an abrupt reversal of a long decline and suggests a pickup in production and freight is ahead.
As for inventories, Haughey advises, “expect small declines to continue into the spring until the ratio declines further to under 1.40. This will keep freight volume gains below shipments gains.”
The positive news came as Federal Reserve Chairman Alan Greenspan told Congress Wednesday that he believes the current economic recession is ending.
Greenspan told the House Financial Services Committee that while a recovery is likely, it will probably be slow. In his semi-annual report to Congress he said the central bank expects the economy this year will grow by between 2.5% to 3%, when measured from the fourth quarter of last year, about half the pace of the normal rebound from a recession.