Key Takeaways: Demand for manufactured goods remained strong at the end of 2017, which was a strong year for growth in factory orders, up a whopping 8.4 percent year-over-year in December. While core capital goods orders—an important proxy for capital goods spending in the U.S. economy—declined in the latest data, they were also up sharply over the past 12 months. That is good news, both for manufacturers and for the larger economy.
The Census Bureau said that new factory orders rose by 1.7 percent in December, the same pace of growth experienced in November. Durable and nondurable goods orders were up 2.8 percent and 0.7 percent in December, respectively. For durable goods firms, much of the increase stemmed from sharply higher sales of defense and nondefense aircraft and parts, jumping 54.7 percent and 15.8 percent, respectively. It is important to note that aircraft orders can be highly volatile from month to month. Excluding transportation equipment, new orders of manufactured goods were up 0.7 percent in December.
Overall, new factory orders—which struggled mightily in 2015 and 2016—trended in the right direction in 2017. Indeed, sales of manufactured goods soared 8.4 percent since December 2016, or 6.6 percent with transportation equipment sales excluded.
On the downside, core capital goods—or nondefense capital goods excluding aircraft—fell 0.6 percent in December. These can often be seen as a proxy for capital spending in the U.S. economy, and as such, the latest figures were a bit of a disappointment. With that said, much like the headline numbers, there was a healthy gain of 8.0 percent over the past 12 months.
Looking specifically at durable goods activity in December, the data were mixed but higher on net. Demand was stronger for primary metals (up 1.8 percent), fabricated metal products (up 1.1 percent), machinery (up 0.4 percent) and motor vehicles and parts (up 0.4 percent). In contrast, there were reduced orders for furniture and related products (down 2.6 percent), electrical equipment and appliances (down 0.9 percent) and computers and electronic products (down 0.1 percent).
Meanwhile, shipments of manufactured goods increased by 0.6 percent in December, with durable and nondurable goods orders were up by 0.5 percent and 0.7 percent, respectively. On a year-over-year basis, factory shipments have risen 5.6 percent since December 2016, or 6.1 percent with transportation excluded.