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Data released on Wednesday in the US came in below expectation, particularly the Durable Goods Orders numbers that showed an unexpected decline. The 1.1% drop in durable goods orders adds to the disappointing slate of February data, explained analysts at Wells Fargo. They point out that while severe winter weather held down shipments last month, the manufacturing sector remains plagued by ongoing supply chain bottlenecks, which is restraining new orders.  

Key Quotes:  

“Durable goods orders fell 1.1% in February, even as January’s gain was revised higher. This upward revision to January and worse-than-expected February was also the case with two other marquee economic indicators: retail sales and industrial production.”

“There is more than just weather holding back activity, particularly for manufacturing where supply chain problems are getting worse, but nothing in today’s report is enough to derail what we expect to be a strong rebound in business spending this year.”

“Expectations for today’s headline print ranged from -4.6% to +5.5%, which speaks to the crosscurrents in manufacturing and the added complications of February’s winter storms.”

“The biggest headwinds for manufacturing as we emerge from this pandemic are mostly about manufacturers getting the stuff they need. From high-tech inputs like semiconductors to basic industrial supplies like steel and even finding the skilled labor to staff the factories, businesses have a supply problem. The downside of that is price pressures and the potential for profit squeeze. The upshot though is that activity and sentiment are soaring.”

“Once global supply chains normalize and businesses can get their hands on the input components they need, we are forecasting a faster rebound for manufacturing than what occurred in the wake of the past two recessions.”