New orders for durable goods posted a solid gain in February, while shipments took a turn in the opposite direction and consumer confidence surged in March.

Today the U.S. Commerce Department reported new orders for goods designed to last three years or more increased 1.5%, the third consecutive monthly increase. That follows a 1.3% increase in January. Excluding transportation, however, new orders decreased 1.3 percent, while new orders for 2002 were 4.6% below the same period a year ago.
In contrast, shipments of durable goods in February decreased 3.2%. This follows a 1.8% January increase. Year to date, shipments for 2002 were 6.5 percent below the same period a year ago.
Overall, the report is disappointing says Newport Communications Senior Economist Jim Haughey, but he notes rising orders and falling inventory are pushing manufacturing toward a more self-sustained recovery.
“The orders rise is more than entirely accounted for by huge gains for defense capital goods and aircraft - periodic orders not likely to be repeated next month,” he says. “However, orders also rose for communications equipment (0.9%), the second monthly rise for this very depressed industry, and electric equipment and appliances, probably driven by a booming housing market and record home sales.”
Shipments declined in every industry except for a 0.4% rise in communications equipment and a 0.7% increase for industrial machinery. “These two industries had been lagging recovery in the rest of the economy, so their improvement is a positive sign," Haughey says.
Inventories fell 0.5% in February following declines at about double that
pace in previous months.
“The last of the 2001 inventory surplus is still to be disposed of in some markets,” according to Haughey. "But enough is now gone that a sustained turn from declining to rising inventory - and a big boost to freight volume - appears to be likely this spring.”
Meantime, the private research group, The Conference Board, reported its Consumer Confidence Index moved up 15.2 percentage points in March to 110.2, up from a revised 95.0 in February.
“The increase was across the board, encompassing both assessments of current economic and employment conditions as well as expectations for six months ahead,” says Haughey.
“The February dip was accompanied by relatively weak reports for many consumer and industrial sectors of the economy. It was the survey that reflected the first impact of the details of the Enron mess and the renewed fighting in Afghanistan. Todays' news is that consumers have shrugged off these threats to economic recovery.”
The new numbers compare to an all-time high of 144.7 in May and an eight-year low of 84.9 in November.