The sharp drop in new orders for manufactured durable goods in February reported by the Commerce Department suggests that “war jitters have put the manufacturing recovery in a holding pattern,” said David Huether, chief economist of the National Association of Manufacturers.
“Following a strong 1.9 percent bounce in January, new orders for manufactured durable goods declined by 1.2 percent to $170.2 billion last month,” Huether said. “Increased oil prices and a large decline in consumer confidence in February are clear signs that anticipation of conflict with Iraq heightened uncertainty. Purchases of big-ticket items declined and new orders declined in every category, with the exception of defense capital goods. Of note is that non-defense capital goods orders, which are a good indicator for business investment demand, dropped a sharp 5.2 percent after increasing the previous two months. Clearly, many businesses are putting on hold investment purchases for now.
“To date, this has been the slowest manufacturing recovery since the government began tracking monthly manufacturing output back in 1919,” Huether said. “Today's report shows that conditions will not likely improve until international tensions subside.
“The latest economic news also highlights the critical need for a substantial tax relief package to jump start the economic recovery,” Huether said. “We applaud the House for approving a budget blueprint that allows for the full $726 billion tax plan proposed by President Bush. In order to maximize the impact of a growth package, we strongly urge the Senate to restore the full $726 growth package to their budget blueprint before voting on final passage this afternoon.”