Factory orders rose a very solid 1.8 percent in February in a gain driven by a 3.5 percent jump in durables and including a 0.3 percent rise in nondurables. The rise in durables, as first released last week in the durable goods report, showed wide gains across components though against easy comparisons with very weak January data. The new data in today's report is on non-durable goods which were boosted by orders for chemicals. The ongoing price rise in oil, back above $50 this morning, points to price-related increases underway for many petroleum and petroleum-related products.
But the good news in the report does not extend to factory shipments which slipped back 0.1 percent, setting an unwanted record of seven straight declines. The level of shipments, at $365.9 billion in February, continues to lag the level of new orders, at $352.2 billion, a mismatch that points to declining activity ahead. Inventories, down 1.2 percent, are falling but probably not fast enough especially following yesterday's ISM report for March where many more purchasers said inventories are too high.
The durable goods report for March, to be released Friday, April 24, looks to be the most closely watched durable goods report of the recession. Yesterday's ISM report, which showed incremental month-to-month improvement with significant improvement in new orders, suggests that orders for durable goods may show a second month of gains. Stocks and the dollar firmed very slightly in reaction to today's data.