This February, the manufactured goods sector continued to struggle, ultimately causing new orders for long-lasting manufactured goods in the U.S. to fall. This decrease in new orders was mostly the due to the lower oil prices and a strong dollar. Surprisingly durable goods orders (ranging from aircrafts to toasters) declined 2.8 percent in February, while they actually increased 4.2 percent in January. The biggest drop in durable goods last month was led by a 27 percent decrease in civilian aircraft orders (68 orders in January and just 2 in February). However, in several recent reports this past March, factory activity has shown a pick-up in production. Because of this, there is more optimism that the broader manufacturing sector will expand for the first time since last September.
This article interested me because it examined the recent the drop in oil prices earlier in 2016 to the effects it had on the manufacturing sector of the United States. In addition, the article mentioned how the strong US dollar played a key contribution to the struggling manufacturing sector. It will be interesting to see if the manufacturing sector fulfill's its expectations to expand in the next months ahead.
Full article at: http://www.cnbc.com/2016/03/24/us-durable-goods-orders-fall-as-dollar-strength-lingers.html
It would be interesting to follow up this article with a study regarding how the manufactured goods sector effects the S&P. Does manufactured goods play as large of a role on stock prices as the oil industry? Although manufactured goods have been down the market has rebounded well since, where as when oil is down so does the market. This is a very generalized observation, but could be worth a closer study.
ReplyDeleteThis article is interesting because I initially thought that lower oil prices would have had a positive impact on the sale of manufactured goods in the US. Since both the production side and the sale side of the goods industry rely on oil and gas for shipping and other necessary elements, it would make to me that cheaper oil would imply cheaper production and more sales. However, this does not seem to be the case, and maybe it is due to the strength of the US dollar and trading abroad with other countries ? It will be interesting to watch if this sector improves or worsens as oil prices creep up again overtime.
ReplyDeleteI agree with Hilary as I thought a dip in oil prices would increase manufacturing orders. However, I do not believe a small drop in manufacturing orders is too concerning. Also, do you know what percentage of manufacturing domestic airplanes comprises? I would be interested to see how much of an effect that had on the overall drop of orders.
ReplyDelete