Economic Watch: Rising Factory Orders Latest Indicator of Interest Rate Hike
An increase in new factory orders is one of the latest economic signs that the Federal Reserve is moving close to another jump in interest rates, some analysts believe.
New orders for manufactured goods in January increased 1.2% from the month before, according to a full Commerce Department report released Monday, slightly better than a Wall Street consensus estimate. It was boosted by sizable jumps in the notoriously volatile aircraft components for both defense and nondefense.
This followed an unrevised 1.3% improvement in December while new orders are up 5.5% from January 2016.
Orders for manufactured durable goods increased 2% in January following two straight months of declines, better than the first estimated 1.8% gain.
Total shipments of factory goods increased 0.2% in January following a 2.5% surge in December, marking 11 consecutive monthly improvements.
Shipments of so-called “core-capital goods,” which are an indication of business investment and are used in calculating the nation’s gross domestic product, fell 0.4% in January, better than the first reported 0.6% drop.
“On balance, the hard data in the manufacturing sector continue to show improvement, although the pace has been slower than sentiment indicators alone would indicate,” said Tim Quinlan, senior economist at Wells Fargo Securities.
He noted that core capital goods orders are up 8.7% on a three-month average annualized basis. That’s the fastest pace since 2014 and it corroborates some of the rising sentiment seen in other indicators.
This and other recent indications, such an strong employment, rising prices and anecdotal evidence of a firming gross domestic product, have led some analysts to say they believe the Federal Reserve will increase interest rates when it meets later this month.
Among them is CNBC’s Jim Cramer, who said last week that “The rest of the economy is strong enough to take it” and there is no excuse for the central bank …Read the rest of this story
