The large 3.4% monthly gain in durable goods resulted in a record $257 billion in orders.
By Manuel Gutierrez, Consulting Economist to NKBA
New orders and shipments of manufacturers’ durable goods hit all-time records in January, capping a series of consecutive monthly increases since experiencing a sharp collapse in March and April 2020, at the onset of the pandemic shutdown (Figure 1.)
Orders for durable goods jumped by an unexpected 3.4% in January, reaching $257 billion. Compared to the same month last year, new orders were 6.3% higher.
At the same time, shipments of durable goods increased by a more modest, but still respectable, 2% in January, bringing their value to $261 billion. Similar to new orders, shipments were also higher than they were in January 2020, although by a smaller 6.2%.
The volume of monthly shipments have exceeded orders over the 12 months, which means that manufacturers were likely depleting their inventories.
For analytical purposes, manufacturers’ goods are divided into two categories: Durables, the focus of this article, and Nondurables. The distinction, as the name implies, is based on the durability, or shelf life, of the product. Generally, goods that are used or consumed either immediately or within a relatively short period, approximately up to a year, are classified as Nondurable. Goods like food and chemicals fall within this group.
Durable goods last at least a few years and include such items as automobiles, household appliances and machinery. They represent half of all manufacturers’ goods.
Figure 2 displays the six durable goods categories for which we have available data. Jointly they account for 82% of all durable shipments.
The largest gain was for Transportation Equipment (i.e., autos, airplanes, etc.), with January orders jumping 7.8% to $85 billion. This is also the largest category, accounting for one-third of Durable goods orders.
Electronic Equipment & Appliances also increased substantially, up 4.2% for the month, but translating into just $12 billion.
Computers was one of two categories with fewer new orders in January, but only fell a modest 0.7% to $26 billion. Perhaps, as can be seen in Figure 2, this is a welcome respite after the sharp order increases in since the middle of last year. Also, Computers is the only category whose orders did not collapse in March and April of last year. The need to work from home boosted sales of computers and other household equipment at that time.
Current trends in new orders, combined with the additional infusion of spending if the $1.9 trillion Federal bill is passed, suggest that demand for manufactured goods will continue to rise over the next few months.
