New orders for durable goods increased 5.7% in February, the best month since last September, the Census Bureau reports. But the good news was marred by a 2.7% retreat in business investment (new orders for capital goods less defense and aircraft) last month. The mixed news extends to the year-over-year changes, with new orders overall rising 3.8% vs. year-earlier levels while business investment slumped 1.1% in February compared with a year ago. Today’s update isn’t going to impress anyone, but the numbers du jour at least provide some support for thinking that the long-running deceleration in growth for new orders may have run its course.
It’s worth mentioning that durable goods orders have been out of step with upbeat economic news from elsewhere in the economy in recent months. Indeed, most of the February data skews positive, as I noted last week. The weakness in durable goods orders shouldn't be ignored, but so far it's proven to be a misleading indicator of the broad economic trend.
Meantime, today's update suggests that the long-running slide in the growth rate for durable goods has bottomed out, as the next chart suggests. Yes, that's just speculation at this point. But if the rest of the economic reports continue to hold up in the March releases, it's reasonable to wonder if durable goods orders will mount a rebound in the months ahead.
A modest improvement in the numbers would be welcome, of course, and not all that surprising, either. With quite a lot of the rest of the economy continuing to post modest gains, durable goods orders have been out of step with the broad trend. For now, it's tempting to argue that the weak durable goods data that persisted in 2012 — the descending one-year change comparisons in particular — wasn't all that useful as a forward-looking indicator for the broad economy. Modest growth, with some fits and starts, has rolled on, despite the slowdown in new orders. If durable goods are headed for somewhat stronger comparisons in the spring, the outlook for the business cycle will have another friendly indicator in its corner.