Orders for durable goods across the U.S. have slowed to a crawl in the latest sign that supply chain problems are continuing to create pain for the wider economy.
On Thursday, the Census Bureau released new data that showed the number of orders made to manufacturers dropped by 2.2% in February with the total value dropping from $277.6 billion in January to $271.5 billion. The decrease brought an end to four months of consecutive growth seen across sectors.
When broken down further, a decline in orders from the transportation sector led the way in bringing down February’s numbers. Orders for new transportation equipment plunged by 5.4% and those for motor parts dropped by 0.5%. However, the largest drop recorded was a 30.4% plunge in the number of orders being placed for non-defense aircraft and parts.
A decline in orders for durable goods by U.S. firms comes as challenges at home and abroad promise to create headwinds in the months ahead. Russia’s invasion of Ukraine has raised fears about the supply chains for a wider range of products, including metals and other raw materials.
At the same time, a recent spate of COVID-19 outbreaks in China have led to shutdowns in major manufacturing hubs, including in Shanghai and Shenzhen, that promise further delays in production and deliveries.
All of this is bound to further fuel inflation in the U.S. The last reading of the consumer price index (CPI) showed inflation striking a 40-year high of 7.9%, while the producer price index (PPI) stands 10% higher than it was at the same time last February.
However, demand remains strong in some areas. In terms of defense aircraft parts, orders are up by over 60.1%. Orders for defense capital goods are 14.2% higher and orders for computers and electronic products are 4.4% higher than in the last month.
These numbers are surely to be of concern for the Federal Reserve as it continues down a more hawkish path on interest rates. Last week, the Fed raised rates by a quarter of a percentage point but Chairman Jerome Powell promised Monday that the central bank would act more aggressively if needed to slow inflation.