The Census Bureau reported that durable goods orders dropped 5.2 percent in January, its first decline since August. As was the case at that time, the largest factor in the decrease was a sharp drop in aircraft orders, both for defense and non-defense. Motor vehicle sales were flat, but the transportation sector as a whole had new order fall nearly 20 percent. Reductions in defense spending were largely at play in the lower defense aircraft figures. Excluding transportation, new orders would have risen 1.9 percent.
This latter point suggests that the headline number is somewhat misleading, as there were notable pockets of strength to report. Core capital goods items, or non-defense capital goods excluding aircraft, had new order increases of 6.3 percent in January. This was the fastest pace for core capital goods orders since December 2011.
The sector with the largest gains was machinery, with new sales up 13.5 percent. Other sectors with higher monthly sales included electrical equipment and appliances (up 1.4 percent), other durable goods (up 1.3 percent), and fabricated metal products (up 1.0 percent). Besides aircraft, sectors with declining new orders in January included computer and electronic products (down 5.3 percent) and primary metals (down 3.6 percent).
Meanwhile, shipments of durable goods shrunk 1.2 percent in January. The weaker shipments data were in a number of categories, including computer and electronic products (down 3.5 percent), primary metals (down 3.4 percent), and transportation (down 2.3 percent). Excluding the transportation sector was not enough to make the figure positive, as it would have declined 0.7 percent without it. Some positives, though, were higher shipments from the fabricated metal products (up 1.4 percent), other durable goods (up 1.2 percent), and electronics and appliances (up 0.5 percent).
Chad Moutray is chief economist, National Association of Manufacturers.
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