Thursday, February 27, 2014

U.S. Durable Orders Fall in January ... Orders Rise Excluding Volatile Transportation Category

The Wall Street Journal
By Josh Mitchell And Ben Leubsdorf
Updated Feb. 27, 2014 8:44 a.m. ET

WASHINGTON—A drop in aircraft purchases tugged down overall durable-goods orders in January, but underlying figures suggested firms are slowly moving ahead with investment plans.

Orders for durable goods—products from kitchen appliances to bulldozers designed to last three years or more—fell a seasonally adjusted 1% from December, the Commerce Department said Thursday. That followed December's 5.3% tumble in overall orders.

But excluding the volatile transportation category, orders rose 1.1% last month, the strongest rise since May. Defense spending on capital goods was up sharply. Orders for computers and electronics climbed, but demand for machinery, primary metals and autos fell.

Economists surveyed by Dow Jones had forecast overall durable-goods orders to fall 2% in January.

Durable-goods orders can provide a clue about the direction of the economy, but the data can be choppy from month to month and are often revised. Broader trends suggest orders are rising modestly. From a year ago, overall durable-goods orders were up 2.4%.

The latest slide largely reflected a drop in civilian aircraft demand, with aircraft maker Boeing Co. seeing a big decline in orders last month from December. Aircraft orders tend to swing from month to month and can mask underlying demand in the economy.

Other data showed firms stepped up investment plans, which could lead factories to ramp up production in coming months. A closely watched measure of business spending—orders for nondefense capital goods excluding aircraft—climbed 1.7% in January, nearly reversing December's 1.8% fall. Orders in that category have climbed for two of the last three months—though from a year earlier, they were down 1.7% in January.

Businesses have maintained a cautious posture for much of the economic recovery since 2008 amid subdued consumer spending and weak demand overseas. Now, cold and snowy weather—along with a rise in borrowing costs—are presenting new hurdles to increased business investment.

An earlier report also hinted at factories hitting a lull after growing at a healthy pace late last year. The Institute for Supply Management's purchasing managers index fell sharply in January to a level indicating factory-sector activity barely expanded that month.

It is unclear how much the latest data reflect a fundamental weakness in the U.S. economy versus a temporary slowdown due to the cold weather. Other components of the economy, such as retail sales and the labor market, have also slowed recently after registering healthy growth in the second half of 2013.

Economists expect business spending, along with the broader economy, to pick up in the spring as the weather warms.


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