Reduced Durable Goods Sales Pushed New Factory Orders Lower in December

By February 4, 2014Economy

The Census Bureau reported a 1.5 percent decrease in new factory orders in December, essentially offsetting the 1.5 percent gain observed in November. This news was somewhat expected, particularly given the disappointing preliminary durable goods figures released the week before. Durable goods sales were down 4.2 percent in December, with fairly broad-based declines extending beyond the transportation sector. Weather and the holidays were factors in the reduced figures. In contrast, nondurable goods orders rose 1.1 percent for the month, and new manufacturing orders excluding transportation edged slightly higher, up 0.2 percent.

With the release of December data, we are now able to look at 2013 as a whole. New factory orders were up only marginally for the year, up just 0.8 percent, with a significant amount of volatility in the month-to-month numbers. On a more positive note, manufacturing sales excluding transportation increased 2.0 percent over the past 12 months, suggesting modest gains in the broader market. Similarly, new nondurable goods orders increased 1.2 percent year-over-year.

Looking specifically at the December durable goods data, the decline in new orders stemmed largely from decreases in a number of sectors. This included transportation equipment (down 9.7 percent, including a 1.5 percent decline in motor vehicles), computers and electronics products (down 6.3 percent), fabricated metal products (down 3.1 percent), and primary metals (down 2.3 percent). In contrast, electrical equipment and appliances (up 3.5 percent) and machinery (up 1.3 percent) bucked the negative trend with higher sales for the month.

Meanwhile, manufacturing goods shipments were off by 0.2 percent, with a 0.7 percent gain if you exclude the highly-volatile transportation sector. Durable goods shipments were down 1.7 percent in December, but if you exclude transportation, they would have been essentially unchanged. On the other hand, nondurable goods shipments rose 1.1 percent. For the entire year of 2013, durable goods shipments growth outpaced that for nondurable goods by 3.1 percent to 1.2 percent.

In terms of shipment changes for the month of December, the largest increases were seen in the petroleum and coal products (up 2.7 percent), textile products (up 1.7 percent), leather and allied products (up 1.6 percent), and computer and electronic products (up 1.1 percent) major sectors. At the same time, there were significant shipment declines seen in the transportation equipment (down 5.5 percent), beverage and tobacco products (down 1.9 percent), wood products (down 1.7 percent), fabricated metal products (down 1.1 percent), and nonmetallic mineral products (down 1.1 percent) sectors.

Chad Moutray is the chief economist, National Association of Manufacturers.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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