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Factories in U.S. Feeling the Heat of Rising Dollar and Slump in Energy

Feeling the Heat
A sudden and unexpected drop in orders was seen in the American-made durable goods sector, thanks to the damage caused by a rising dollar coupled with a slump in energy production.
Goods meant to last for at least three years saw a surprising 1.4 percent decline in bookings, after a lower than expected 2 percent rise in January, as revealed by the Commerce Department on Wednesday in Washington. The reason this drop was surprising is the fact that the forecast of 81 economists had expected the orders to rise by 0.2 percent.
As far as orders in the home country are concerned, the plunging in price crude has been experiencing since last year will probably discourage mining and oil companies from purchasing new equipment. On the other hand, when it comes to overseas customers, the rising dollar is surely making them restrict their purchases. Furthermore, thanks to the labor dispute at harsh winter weather and West Coast ports that resulted in serious supply shortages, manufacturing may need quite a bit of time to get hold of its old status and position in the U.S. economy.

A news post on Bloomberg quotes Chris Low, chief economist at FTN Financial in New York, saying that they are surely feeling the heat due to rising dollar, and it’s also pretty evident in production data and many manufacturing surveys. He also predicts that the orders for American durable goods may decline further. He added that demand is likely to be on the lower side as the oil slowdown is yet to unleash its full impact.

February too witnessed a sharp fall in the orders, as mentioned by a detailed news post on the topic. There seem to be some other smaller factors that have contributed to this sudden and intense slowdown in the orders for American durable goods which includes a severe weather.

Stocks

Stock forecasts range from 2% drop to as high as 3.5% increase

Stocks fell for the third day in a row, thanks to the technology shares heading lower led by semiconductor companies. The Standard & Poor’s 500 Index tumbled 0.9 percent to 2071.78 at 12:41 p.m. in New York.

The survey results include forecasts of a wide range, from as low as a 2 percent drop to as high as a 3.5 percent increase.

However, one of the major disappointments came when the orders for non-military capital goods except those related to aircraft witnessed a steep 1.4 percent decline, despite being considered a safe hub for future business investment. Surprisingly enough, they have tumbled six times in a row now. The disappointment was quite widespread, as they were expected to rise by 0.3 percent. Instead, they showed the longest slowdown since mid-2012, a big reason to worry.

However, the Commerce Department provides reports that aren’t very specific, as they offer only broad idea of categories, making it quite challenging to make out which industries have took the biggest beating. As far as Machinery bookings are concerned, however, they surely have taken a considerable amount of damage, declining 1.8 percent in February, and a surprising 10.2 percent over the past six months. This is also the worst time they have had since 2009, a year which was still suffering from the recession heat.

About the author

Dean Smith