US December factory orders post biggest drop in a year

[WASHINGTON] New orders for US factory goods fell in December by the most in a year as manufacturing continued to reel from the headwinds of a strong dollar and weak overseas demand.

The Commerce Department said on Thursday new orders for manufactured goods dropped 2.9 per cent, the largest drop since December 2014, after a downwardly revised 0.7 per cent fall in November.

Economists polled by Reuters had forecast factory orders falling 2.8 per cent in December after a previously reported 0.2 per cent dip in November. Factory orders fell 6.6 per cent in 2015.

Manufacturing, which accounts for about 12 per cent of the economy, is also being pressured by an inventory overhang and cuts in capital spending by oil firms as they try to adjust to a collapse in oil prices.

But the factory downturn could be close to bottoming, though dollar strength and weak overseas demand could remain a challenge. A survey on Monday showed that although manufacturing contracted in January for a fourth straight month, activity ticked up as new orders rebounded.

The dollar has gained 22.2 per cent against the currencies of the United States' main trading partners since June 2014. Oil prices have plunged about 70 per cent in the last 18 months, hit by a growing glut and cooling economic growth in China and other emerging markets.

In December, orders for transportation equipment fell 12.6 per cent, mostly reflecting a drop in aircraft orders. Orders for automobiles and parts rose 1.4 per cent.

The Commerce Department also said orders for durable goods, items meant to last three years or more ranging from toasters to aircraft, fell 5.0 per cent in December instead of the 5.1 per cent plunge reported last month.

Orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - dropped 4.3 per cent as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 0.2 per cent instead of the reported 0.2 dip reported last month.

Inventories of factory goods rose after five straight months of declines. While that would be a positive sign for manufacturing, the inventories-to-shipments ratio rose to 1.38 from 1.35 in November, suggesting stocks remain too high.

Unfilled orders at factories dropped 0.5 per cent after two straight months of increases.

REUTERS