Demand shrinking among businesses as durable goods prices rise

Copier

Orders for durable goods, such as office equipment like photocopiers, fell over February. Photo Credit: Joseph Barillari/Wikimedia Commons/CC-BY-SA

Weak demand has caused orders of durable goods to fall over the past month. Orders for durable goods, or manufactured goods that last for long periods of time, rose in January, but rising prices may have put a damper on the willingness of businesses to order such goods. However, orders for transportation items such as cars and planes were not affected.

Transport manufacturers untouched by falling demand

Orders for durable goods, such as computers and other office equipment, have been falling for consecutive months, but transportation has not been touched, according to AOL News. Orders for cars and trucks rose by 1.9 percent during February. Orders for commercial aircraft rose by 26.7 percent. However, orders for new defense aircraft dropped by 18.4 percent, as new planes and helicopters are not a priority to a cash-strapped Congress. Orders for all durable goods, excluding transportation, fell 0.6 percent during February, marking the fourth month of declining durable goods orders in the past five.

Consumer prices ticking up

Energy costs are directly affected by oil prices and gas prices, and speculators have been driving the price of gasoline steadily up for consecutive weeks, causing the cost of consumer goods to rise, according to CNN. For instance, the prices of Folgers and Maxwell House coffee were raised by Smuckers and Kraft, the parent companies of the brands. Consumer prices for essential goods have been slowly but steadily rising, and increased energy costs ensure that trend will continue. However, prices of non-essential goods, like the iPad 2, are expected to hold steady as consumers will hold off on gadgets if food prices go through the roof.

Expensive summer likely ahead

The increase in the price of gasoline is not due to a shortage of supply. However, the cost of a gallon of gas is still rising, which could have a negative effect on retailers and consumers, according to MSNBC. Transportation costs affect goods, in that the more it costs to get things like Huggies diapers and T-shirts to stores, the more stores have to charge for them. Given that businesses are cutting back on durable goods, and producers are raising prices, consumers are likely to see an increase in the cost of food and other essential items. Producers can charge more for a gallon of gas or coffee or a loaf of bread because those are items that people will always buy. However, because demand is staying low for non-essentials, according to CNBC, people can still score a cheap iPad if they can afford to part with the cash.

Sources

AOL News

CNN

CNBC

MSNBC

 

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