US factory orders fall in December; shipments rise further

[WASHINGTON] New orders for US-made goods fell slightly more than expected in December, but manufacturing remains supported by businesses replenishing inventories.

The Commerce Department said on Thursday that factory orders decreased 0.4 per cent in December. Data for November was revised higher to show orders increasing 1.8 per cent instead of 1.6 per cent as previously reported. Economists polled by Reuters had forecast factory orders slipping 0.2 per cent. Orders increased 16.9 per cent in 2021.

Manufacturing, which accounts for 11.9 per cent of the economy, is being underpinned by businesses rebuilding inventories.

Inventory investment surged at a seasonally adjusted annualised rate of US$173.5 billion in the fourth quarter, the second-largest quarterly increase on record.

Most economists see more scope for inventories to rise, noting that inflation-adjusted inventories remain below their pre-pandemic level. Sales-to-inventory ratios are also low.

Inventories contributed 4.90 percentage points to the fourth quarter's 6.9 per cent annualised growth pace.

In December, there were decreases in orders for computers and electronic products as well as transportation equipment. But orders for machinery, primary metals and fabricated metal products increased as did those for electrical equipment, appliances and components.

Shipments of manufactured goods rose 0.4 per cent in December after increasing 0.7 per cent in November. Inventories at factories climbed 0.3 per cent. Unfilled orders rose 0.5 per cent after gaining 0.8 per cent in the prior month.

The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, rose 0.3 per cent in December instead of being unchanged 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, increased 1.3 per cent in December as previously reported.

Business spending on equipment rebounded in the fourth quarter.REUTERS