The numbers: U.S. manufacturers in January booked the biggest increase in orders in six months, pointing to an economy that is gaining steam again after a letdown at the end of 2020.
Orders for durable goods — products meant to last at least three years — rose 3.4% in January, the government said Thursday. Economists surveyed by Dow Jones and the Wall Street Journal had forecast a 1% advance.
Orders for manufacturers have now returned to precrisis levels, reflecting in large part a major shift among consumers toward the purchase of goods such as new cars, houses, appliances, electronics and so forth. Americans are spending a lot less on services.
What happened: The increase in order bookings last month was spearheaded by a large increase in orders for passenger jets, fighter planes and other military hardware.
Orders also rose sharply for computers and primary metals used in a wide array of goods.
New orders fell slightly for new cars and trucks.
The biggest change in January was in aircraft orders. Boeing /zigman2/quotes/208579720/composite BA -0.67% reported far fewer cancellations last month than has typically been the case during the course of the pandemic. As a result, orders for commercial aircraft supposedly leaped 390% last month.
The increase is really a statistical quirk, though. There’s really very little demand right now for new aircraft in light of pandemic-induced restrictions on global flight that have triggered an unprecedented collapse in air travel.
If transportation is excluded, durable-goods orders rose a more modest 1.4% in January. Regular ups and downs in transportation often exaggerate monthly changes in the level of demand.
A key measure of business investment, meanwhile, edged up 0.5% in January, extending its winning streak to nine months. These are known as core orders and exclude defense and transportation.
Higher investment is usually a sign of growing optimism in future sales and the health of the broader economy. Investment now easily exceeds year-ago levels even though the coronavirus continues to depress large parts of the economy.
The big picture: Manufacturers are leading the charge as the U.S. economy emerges from the shadows of a record surge in coronavirus cases over the winter. Consumers are buying more goods in person or online even as they are shunning services such as dining out or travel.
The road ahead won’t be free and clear, however.
Many companies are struggling to obtain critical supplies such as semiconductors, and a dearth of skilled labor has partly hobbled otherwise surging production. Winter storms and the power outage in Texas could also end up being a short-term drag.
What they are saying? “Industrial momentum will gradually cool heading into the summer as vaccine diffusion unleashes pent-up demand for services,” said lead economist Oren Klachkin. “However, underlying strength will keep factory activity growing healthily even after the pandemic ends.”