Orders for durable goods stalled unexpectedly in July. But manufacturers have plenty of backlogs to work through.

There are a lot of businesses across the economy with empty shelves as they wait for manufacturers to ship the goods. This has been crimping sales while also driving inflation.

  • Order backlogs offer a snapshot of how much stuff manufacturers have yet to deliver.

Unfilled orders — the backlog — of manufactured goods grew 0.3% month over month to $1.23 trillion in July, according to Census Bureau data released Wednesday.

  • This was the sixth consecutive month of gains.
  • The backlog of core capital goods orders climbed to a record-high $230.9 billion.

 “Huge order backlogs will keep manufacturers busy,” ING chief international economist James Knightley says. “With customer inventories at all-time lows, manufacturers are also gaining pricing power and this can already be seen in numerous surveys of prices received.”

  • “Backlogs in the manufacturing sector are expected to take well into 2022 to clear,” Grant Thornton chief economist Diane Swonk says.

While this may sound good from a demand perspective, the pressure is high for manufacturers to compete.

  • “When it comes to unfilled orders for manufacturers, it’s like being a bartender on a super busy night,” Tim Quinlan, Wells Fargo senior economist, tells Axios. “It’s good in the sense that you are three deep at the bar.”
  • “But it can be bad if you’re out of lime wedges, you're running out of booze and your other bartender called in to tell you he just took another job. You’re slammed, but your customers are gonna find another place for a drink if you can’t pick up the pace."

UBS U.S. economist Sam Coffin notes that while unfilled orders have been on the rise, shipments of goods have risen even faster.

  • “The ratio of unfilled orders to shipments surged during the pandemic amid supply constraints,” he tells Axios. “It has fallen back to a more normal ratio and does not look particularly high or low, in aggregate, now.”
  • In fact, shipments climbed 2.2% month over month to a record-high $257.8 billion in July.

 The good news for manufacturers is they have a lot of stuff to make. The good news for their customers is that this stuff is getting manufactured and shipped at an increasing rate.

The U.S. economy grew at a robust 6.6% annual rate last quarter, slightly faster than previously estimated, the government said Thursday in a report that pointed to a sustained consumer-led rebound from the pandemic recession. But worries are growing that the delta variant of the coronavirus is beginning to cause a slowdown.

The report from the Commerce Department estimated that the nation’s gross domestic product — its total output of goods and services — accelerated slightly in the April-June quarter from the 6.5% it had initially reported last month. The economy’s expansion last quarter followed a solid 6.3% annual growth rate in the January-March period.

In recent weeks, many economists have been downgrading their estimates of GDP growth for this quarter, and for 2021 as a whole, as the now-dominant delta variant has sent confirmed COVID-19 cases rising throughout the country.

New reported cases are now topping 150,000 a day, the highest level since late January. As a consequence, real-time tracking of consumer activities, notably for airline travel and restaurant dining, has weakened in recent weeks.

The government’s upgraded estimate for growth in the April-June quarter fell somewhat shy of expectations. Some economists had predicted a 7% annual rate or more. They based that view on a belief that consumer spending had accelerated even faster than the sizzling 11.8% rate first reported. Thursday’s revised estimate for consumer spending, which drives about 70% of economic activity, was upgraded by 0.1 percentage point to 11.9%.

The slight rise in the government’s estimate for April-June growth reflected, in part, stronger business investment, which grew at a solid 9.3% rate, and export sales, which were up at a 6.6% rate after falling in the first quarter. Offsetting that strength was a bigger drag from cutbacks in businesses inventory restocking and weaker home building, which fell at an 11.5% annual rate. This sector has been hurt by surging prices for materials and a shortage of construction workers.

Goldman Sachs has cut its forecast for annual growth in the current July-September quarter from 9% to 5.5%, citing the effects of the delta variant. Likewise, Wells Fargo economists have downgraded their third-quarter GDP forecast from an 8.8% annual rate to 6.8%, also because of the surge in COVID cases.

Some forecasters have also reduced their outlook for the full year, though by smaller amounts, in anticipation that the economy could re-accelerate in the final three months of 2021 if COVID cases ease as vaccines are increasingly administered. But uncertainty remains.

“The real question is how well spending will hold up against the current delta wave,” said Leslie Preston, senior economist at TD Economics. “Some high-frequency indicators are pointing to a loss in momentum in spending as consumer caution creeps in.”

Mark Zandi, the chief economist at Moody’s Analytics, said he had downgraded his forecast for annual GDP growth this quarter from 8.4% to 6.5%. But he predicted that GDP will expand at a strong 6.4% annual rate in the final three months of the year.

That would leave growth for the full year at a brisk 6.1%, which would be the fastest calendar-year expansion since a 7.2% gain in 1984. Last year, the economy shrank 3.4% as the pandemic-triggered recession wiped out tens of millions of jobs.

At the same time, Zandi cautioned that COVID remains in his mind the most serious economic risk.

“The economy is linked at the hip to the pandemic,” he said. “So long as the pandemic is raging, that will drive a lot of what happens in the economy.”

The uncertainty surrounding COVID is complicating the work of the Federal Reserve. The Fed is caught between the risks posed by COVID, which would normally call for continued economic support from the central bank, and rising inflation, which creates pressure on the Fed to consider dialing back its ultra-low-interest rate policies.

The GDP report Thursday showed prices rising at a 6.5% annual rate in the second quarter, the fastest such pace since a 6.8% quarterly increase in 1981 when the Fed was fighting high inflation by raising interest rates to historic highs.

Financial markets will be listening closely when Fed Chair Jerome Powell gives a high-profile speech Friday morning as part of an annual conference of central bankers. The conference, sponsored by the Federal Reserve Bank of Kansas City and normally held in Jackson Hole, Wyoming, will instead be a virtual-only event for a second straight year because of rising COVID cases in Wyoming.

In its GDP report Thursday, the government said that purchases of durable goods, which include vehicles, appliances, furniture, and electronic gear, among other longer-lasting items, rose at an 11.3% rate in the second quarter. That was a strong figure, though well below the 50% jump in the first quarter, when consumers went on a pent-up buying spree as the economy increasingly reopened.

In the revised data, consumer spending on services — air travel, restaurant meals, entertainment events, and the like — grew at an 11.3% annual rate, below the initial estimate of 12% but well above the 3.9% growth rate in the first quarter. The increase in services spending in the second quarter reflected a shift away from the goods purchases that many people had made while hunkered down at home to spending on services, from haircuts to sporting events to vacation trips.

 Half of the American workers are in favor of vaccine requirements at their workplaces, according to a new poll, at a time when such mandates gain traction following the federal government’s full approval of Pfizer’s COVID-19 vaccine.

The poll from The Associated Press-NORC Center for Public Affairs Research shows that about 59% of remote workers favor vaccine requirements in their own workplaces, compared with 47% of those who are currently working in person. About one-quarter of workers — in person and remote — are opposed.

The sentiment is similar for workplace mask mandates, with 50% of Americans working in person favoring them and 29% opposed, while 59% of remote workers are in favor.

About 6 in 10 college graduates, who are more likely to have jobs that can be done remotely, support both mask and vaccine mandates at their workplaces, compared with about 4 in 10 workers without college degrees.

Christopher Messick, an electrical engineer who is mostly working from home in Brunswick, Maryland, said he wrote to his company’s human resources department to ask that employees be required to get vaccinated before they are recalled to the office.

Messick, who is vaccinated, said he doesn’t just worry about his own health. He said he also doesn’t want to worry about getting a breakthrough infection that could land an unvaccinated co-worker in the hospital.

“I don’t want to sit in an office for eight hours a day with someone who is not vaccinated,” said Messick, 41. “The people who are anti-vax, I see them as selfish.”

So far, many vaccine requirements are coming from private companies with employees who have mostly been able to work from home during the pandemic. The companies, including major tech companies and investment banks, have workforces that are already largely vaccinated and consider the requirement a key step toward eventually reopening offices. Goldman Sachs joined that trend Tuesday, telling employees in a memo that anyone who enters its U.S. offices must be fully vaccinated starting Sept. 7.

In contrast, few companies that rely on hourly service workers have imposed vaccine mandates because the companies are concerned about losing staff at a time of acute labor shortages and turnover. Exceptions include food processing giant Tyson Foods and Walt Disney World, which reached a deal this week with its unions to require all workers at its theme park in Orlando, Florida, to be vaccinated.

The AP-NORC poll was conducted before the FDA granted full approval of Pfizer’s vaccine, which some experts and employers are hoping will persuade more people to get the shot and support mandates.

Drugstore chain CVS said this week that pharmacists, nurses, and other workers who have contact with patients will have to be inoculated, but the company stopped short of requiring the vaccine for other employees such as cashiers.

The AP-NORC poll showed high support for vaccine mandates among those who say they work in person in a health care setting, with 70% approving of vaccine requirements at their workplace.

The poll also showed divisions along racial lines.

Seventy-three percent of Black workers and 59% of Hispanic workers — who are more likely than white workers to work in front-line jobs — support mask mandates at their workplaces, compared with 42% of white workers. In addition, 53% of Black and Hispanic workers support vaccine mandates at their workplaces, as do 44% of white workers.

Despite mixed support for mandates among in-person employees, 71% of those workers said they themselves are vaccinated.

Mike Rodriguez, a maintenance worker at an auto dealership in Florida, said he got the vaccine in the spring after a diabetes diagnosis gave him a sense of urgency. But he said he leans against supporting a vaccine mandate at his job and does not mind that masks are not required.

“I don’t like being told what to do. Never have,” said Rodriguez, 54. “I’m going to wear mine no matter what. Just like whenever I go into a store. That’s my choice.”

Many large retailers, grocery store chains, food manufacturers, and other companies have aggressively encouraged vaccinations with bonuses, time off, information campaigns, and on-site vaccination access.

Janet Haynes of Topeka, Kansas, an education consultant who works part-time as a package handler at a warehouse, said she struggled in March to get an appointment, putting herself on various waiting lists before she finally got a call. Now that vaccines are widely available, Haynes said she is frustrated with people who are reluctant to get them and she would support a requirement at her warehouse, where she dodges co-workers who flout a mask rule.

“We get so hung up on democracy and freedom, but the reality is that your freedom can’t exist at the expense of someone else’s loss,” said Haynes, adding that she recently had a breakthrough case of COVID-19 and credits the vaccine for her swift recovery. “We are not going to be free until we get vaccinated.”

The number of Americans filing initial claims for jobless benefits rose for the first time in five weeks, even though the economy and job market have been recovering briskly from the coronavirus pandemic.

The Labor Department reported Thursday that jobless claims edged up to 353,000 from 349,000 a week earlier. The weekly count has fallen more or less steadily since topping 900,000 in early January, helped by the rollout of COVID-19 vaccines that have encouraged businesses to reopen and has lured consumers out of their homes to restaurants, bars, and shops. But a resurgence of cases linked to the highly contagious Delta variant has clouded the economic outlook. 

"The downward trend in claims continues, despite the Covid-Delta wave, presumably because the bar to letting staff go is very high, given the tightness of the labor market," Ian Shepherdson, chief economist with Pantheon Macroeconomics, said in a research note. "Firms can't be sure they'll be able to rehire people laid off now."