WASHINGTON (AP) — Orders to U.S. factories for big-ticket manufactured goods posted a 1.2 percent advance in December, but much of the strength came from a surge in demand for commercial aircraft, a notoriously volatile sector.
In a worrisome development, a key category that tracks business investment fell for a second straight month.
The December advance in orders for durable goods followed a 1 percent rise in November which was revised up from an initial reading of 0.7 percent, the Commerce Department reported Thursday.
But orders for non-defense capital goods excluding aircraft, a closely watched category used as a proxy for business investment plans, fell 0.7 percent in December after a 1 percent drop in November.
Analysts called this a troubling sign that business investment, a key area that has supported economic growth during this recovery, could be losing momentum despite the big corporate tax cut Congress approved in December 2017 that was aimed at boosting investment.
“Unfortunately, there looks to be little prospect of a rebound in investment growth any time soon,” said Andrew Hunter, senior U.S. economist at Capital Economics. “There has been a clear deterioration in global manufacturing conditions in recent months.”
The strength in the overall number for orders came from a 28.4 percent jump in commercial aircraft orders, which can swing sharply from month to month.
Durable goods orders have been weak since August, when they had surged by 4.7 percent. Analysts believe part of the weakness is a cutback in demand for U.S. exports of manufactured goods, reflecting higher tariffs many countries have imposed on U.S. goods in retaliation for tariffs the Trump administration has imposed in an escalating trade war with China and other nations.
The government has not reported on durable goods since Dec. 21, the day before the start of a 35-day partial government shutdown that has disrupted the release of many key economic indicators. That data gap has made it harder for economists to get a reading on the current health of the economy.
The government will finally provide a look at the economy’s overall performance next week when it releases the gross domestic product for the fourth quarter. Analysts have been downgrading their estimates of this figure since a disappointing December retail sales report last week showing that sales had plunged 1.2 percent in December, the biggest one-month decline in nine years.
Analysts at JPMorgan Chase have trimmed their forecast for fourth-quarter GDP to a 1.6 percent rate of increase with first-quarter growth expected to come in at 1.8 percent. That would mark a sizable downshift from GDP growth of 4.2 percent in the second quarter last year and 3.4 percent in the third quarter.
The durable goods report showed that demand for primary metals such as steel fell 0.9 percent in December while orders for machinery dipped 0.4 percent and orders for communications equipment plunged 5 percent.
The Western Journal has not reviewed this Associated Press story prior to publication. Therefore, it may contain editorial bias or may in some other way not meet our normal editorial standards. It is provided to our readers as a service from The Western Journal.
Truth and Accuracy
We are committed to truth and accuracy in all of our journalism. Read our editorial standards.