In December, orders for long-lasting U.S. manufactured goods unexpectedly fell. This decline raises concerns about the economy’s strength. According to the Commerce Department, durable goods orders dropped by 4.3 percent. The drop was mainly due to weak demand in transportation equipment, primary metals, computers, electronic products, and capital goods.
Largest Decline Since July
The fall in orders for durable goods was the most significant since July. It reversed the previous month’s revised 2.6 percent increase. Economists had anticipated that orders would rise by 1.8 percent in December, following a reported 3.4 percent advance in November. This unexpected decline may cast a shadow over what seemed like a bright economic outlook.
Despite the overall decline, Boeing reported a strong increase in aircraft orders. The company announced that it received orders for 319 planes in December, a significant increase compared to 110 planes in November. However, the decline in overall durable goods orders suggests a more complex picture for the manufacturing sector.
Seasonal Adjustments Affect Data
The drop in orders may be partly attributed to seasonal adjustments made by the government. The model used to smooth out seasonal fluctuations might have anticipated a surge in aircraft orders for December.
When transportation is excluded, durable goods orders still fell by 1.6 percent. This decline marks the largest drop since March, following a slight 0.1 percent increase in November. The volatility in durable goods data makes it essential to analyze the details behind the numbers.
Business Spending Plans Show Weakness
Another concerning trend is the decline in orders for non-defense capital goods, excluding aircraft. This category is a closely watched indicator of business spending plans. Orders fell by 1.3 percent after a revised 2.6 percent increase in November. Economists had expected a 0.5 percent rise in December following a previously reported 4.1 percent surge in November.
Additionally, shipments of core capital goods, which are vital for measuring equipment spending in the government’s GDP calculations, slipped by 0.2 percent last month. This suggests that businesses may be tightening their spending plans amid uncertain economic conditions.
Conclusion
The unexpected decline in U.S. durable goods orders for December presents a challenging outlook for the economy. The drop in orders, especially in critical sectors, raises concerns about future manufacturing activity. As businesses reassess their spending plans, the potential for slower growth in the early part of the year becomes more apparent. Moving forward, it will be crucial to monitor these trends closely to gauge the overall health of the economy.
