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US durable goods orders rebound strongly in January

Thursday, February 25, 2016 - 21:55

[WASHINGTON] New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up across the board, offering a ray of hope for the downtrodden manufacturing sector.

The Commerce Department said on Thursday that orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, surged 4.9 per cent last month, reversing December's revised 4.6 per cent plunge.

January's increase was the largest since March. Economists polled by Reuters had forecast durable goods orders rebounding only 2.5 per cent in January after a previously reported 5.0 per cent decline in December.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 3.9 per cent after tumbling by a revised 3.7 per cent in December. These so-called core capital goods orders were previously reported to have decreased 4.3 per cent in December.

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The durable goods report was the latest indication that the worst of the manufacturing downturn was probably over. Manufacturing output rose solidly in January and factory payrolls that month increased by the most since August 2013.

The sector, which accounts for 12 per cent of the US economy, remains constrained by a strong dollar, weak global demand and capital spending cuts by oilfield service firms like Schlumberger and Halliburton following a plunge in oil prices.

Efforts by businesses to sell unwanted inventory have also meant fewer orders placed, adding to pressure on factories. Tighter financial conditions in the wake of a global stock market sell-off pose a risk to capital spending.

Durable goods orders were last month boosted by a 54.2 per cent surge in civilian aircraft orders.

There were increases in orders for primary metals, fabricated metal products, machinery, computers and electronic products as well as electrical equipment, appliances and components. Orders for motor vehicles and parts rose 3.0 per cent.

Shipments of core capital goods - used to calculate equipment spending in the gross domestic product report - fell 0.4 per cent last month after advancing 0.9 per cent in December.

The drop in shipments in January could see economists trim their first-quarter GDP growth estimates, which are currently running above a 2 per cent annual rate. The economy grew at a 0.7 per cent pace in the fourth quarter.

Unfilled durable goods orders edged up 0.1 per cent after falling 0.5 per cent in December. Durable goods inventories slipped 0.1 per cent last month after rising 0.2 per cent in December.

REUTERS

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