Durable Orders Edge up in December

By January 28, 2010Economy

Today’s Commerce Department report on durable goods orders edging up 0.3 percent in December after two consecutive monthly declines continues to show that the domestic economic recovery remains fragile and uneven, as gains in machinery and primary metals were nearly offset by declines in transportation, computers and electronics and electrical equipment. For the fourth quarter overall, durable goods orders rose at an annual rate of just 1.6 percent after a 15.8 percent gain in the third quarter.

Based on recent reports of U.S. exports, most of the upturn in capital goods shipments in the fourth quarter, which rose at an annual rate of 6.7 percent, was driven by increasing global demand, rather than an upturn in domestic business investment. In November, capital goods exports had their biggest 3-month gain in four years.

Earlier in the third quarter, capital goods shipments rose at an annual rate of 5.1 percent, with most of this increase fueled by a 10 percent increase in capital goods exports, since domestic equipment investment edged up just 1.5 percent in the third quarter. This scenario is likely repeating itself in the fourth quarter.

While tight financial conditions, heightened uncertainty and excess capacity remain serious domestic challenges, a rebounding global economy is helping the manufacturing sector recover from a very deep downturn. With half of U.S. capital goods shipments destined for global markets, the recent upturn in manufacturing activity clearly shows how important the global economy is to U.S. manufacturers.  

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