Manufacturers Alliance/MAPI Analysis on Durable Goods: Continuing Uncertainties

The following is an analysis from Cliff Waldman, Economist for the Manufacturers Alliance/MAPI, regarding the durable goods report for August 2011: 

“The August report on demand for long-lasting manufactured goods well reflects the
mix of uncertainties in the U.S. and global economic climates.  A 1.1
percent increase in new orders for nondefense capital goods, excluding
aircraft, a proxy for business equipment spending, suggests that—while
sluggish—capital spending has been strong enough to keep a troubled U.S.
economy from sliding into what could be a difficult and damaging new
recession,” Waldman said.  “It was especially encouraging to see at least
a modest degree of energy in capital investment during a month that featured
many assaults on business and consumer confidence, from a debilitating debate
on the U.S. debt ceiling to suggestions that the Eurozone sovereign debt
quagmire was spinning out of policymakers’ control. 

“Nonetheless, the August report shows that manufacturing activity is clearly moderating as
global economic growth slows,” he added.  “Total new orders for durable goods
fell by 0.1 percent, with and without the volatile transportation
component.  And there was notable weakness in primary metals, fabricated
metals, and machinery demand, all of which are industry sectors that produce
integral components of a wide range of manufacturing supply chains.

“Earlier in this tepid U.S. economic recovery, the manufacturing sector was able to buck
the trend of general economic weakness because of a sharp rebound in inventory
accumulation and a faster than expected recovery in the growth of the emerging
markets that have become increasingly important for U.S. manufacturing
profitability,” Waldman noted.  “But as the inventory swing abates and as
global growth slows, the factory sector is facing much the same risks as the rest
of the economy, from the burden of housing and labor market difficulties to the
threats posed by an increasingly difficult financial and economic crisis in the
Eurozone.”