U.S. Durable goods orders unexpectedly plunge in December
Orders for long-lasting U.S. manufactured goods unexpectedly fell in December as did a gauge of planned business spending on capital goods, which could cast a shadow on an otherwise bright economic outlook.
The Commerce Department said on Tuesday durable goods orders dropped 4.3 percent, pulled down by weak demand for transportation equipment, primary metals, computers and electronic products and capital goods.
Last month’s decline in orders for durable goods – items from toasters to aircraft meant to last three years or more – was the largest since July and reversed November’s revised 2.6 percent rise.
Economists polled by Reuters had expected orders to rise 1.8 percent in December after November’s previously reported 3.4 percent advance.
U.S. stock index futures briefly turned negative on the data and the dollar fell against the euro.
The report puts a wrinkle on the economy’s outlook, which had been bolstered by upbeat data on consumer spending and industrial production.
“We had been on a run of pretty uniform upside surprises, and the data lately have been a bit more mixed, so some of that very strong momentum that we saw at the end of the year is cooling off a little bit,” said Julia Coronado, chief North America economist at BNP Paribas in New York.
The report came as officials from the Federal Reserve were due to start a two-day policy meeting.
The Fed in December give the economy a vote of confidence, announcing it would start dialing back its monthly bond purchases starting this month. It is expected announce further cuts to the bond purchases on Wednesday.
Durable goods orders fell despite a strong rise in aircraft orders at Boeing. The aircraft company reported on its website that it received orders for 319 planes last month compared with 110 in November.
Orders may have dropped because the model used by the government to iron out seasonal fluctuations was likely anticipating a big increase in aircraft orders in December anyway.
Excluding transportation, orders fell 1.6 percent, the biggest decline since March, after edging up 0.1 percent in November.
While durable goods data is volatile from month to month, details of the report could support views that factory activity will cool off early this year after output grew at its fastest pace in nearly two years in the fourth quarter.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 1.3 percent after rising by a revised 2.6 percent in November.
Economists had expected orders for these so-called core capital goods to increase 0.5 percent in December after a previously reported 4.1 percent surge in November.
Shipments of core capital goods, which are used to calculate equipment spending in the government’s measure of gross domestic product, slipped 0.2 percent last month.
They had increased 2.3 percent in November, with farm machinery accounting for much of the increase. The decline in shipments last month could see economists lower their fairly strong fourth-quarter GDP estimates.
The government will release its advance fourth-quarter GDP report on Thursday.
Last month, transportation equipment orders tumbled 9.5 percent, also the largest fall since July. Orders for motor vehicles recorded their largest drop since August 2011.
Outside transportation, orders were broadly weak, with only orders for machinery, and electrical equipment, appliances and components rising.