US factory orders post largest increase in nearly 18 months

[WASHINGTON] New orders for US-made goods increased by the most in nearly 18 months in December amid strong demand for defence aircraft, but weak business spending on equipment pointed to limited scope for a sharp rebound in manufacturing even as business confidence is improving.

Factory goods orders surged 1.8 per cent, the largest gain since August 2018, the Commerce Department said on Tuesday. Data for November was revised down to show orders tumbling 1.2 per cent instead of dropping 0.7 per cent as previously reported. Economists polled by Reuters had forecast factory orders would increase 1.2 per cent in December.

Factory orders fell 0.6 per cent in 2019. Shipments of manufactured goods rose 0.5 per cent in December after gaining 0.3 per cent in November.

Easing trade tensions between the United States and China have led to a pickup in business sentiment. A survey on Monday from the Institute for Supply Management showed its measure of national factory activity rebounded in January after contracting for five straight months.

But risks continue to loom over manufacturing, which accounts for 11 per cent of the US economy. While Washington and Beijing signed a Phase 1 trade deal last month, US tariffs on US$360 billion of Chinese imports, about two-thirds of the total, remain.

Boeing last month suspended production of its troubled 737 MAX jetliner, which was grounded last March following two fatal crashes. The coronavirus, which has killed hundreds of people in China and infected thousands globally, could disrupt supply chains, especially for electronics producers.

Transportation equipment orders surged 7.9 per cent in December, the biggest increase since August 2018, after plunging 8.2 per cent in the prior month. Orders were boosted by a 168.3 per cent jump in demand for defense aircraft and parts, which offset a 74.7 per cent tumble in orders for civilian aircraft and parts. Motor vehicle and parts orders increased 0.5 per cent in December.

But machinery orders fell 1.0 per cent in December after dropping 1.2 per cent in November. Orders for electrical equipment, appliances and components orders decreased 0.3 per cent in December.

The government also said orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, dropped 0.8 per cent in December instead of deceasing 0.9 per cent as reported last month.

REUTERS