AP News

Ahead of the Bell: US Durable Goods

WASHINGTON (AP) — A sharp drop in demand for commercial aircraft likely drove down orders for U.S. long-lasting manufactured goods in January. Excluding aircraft and defense goods, orders may have risen slightly, a sign that business investment plans are subdued.

Economists forecast that durable goods orders plummeted 4 percent in January, according to a survey by FactSet. The Commerce Department will release the report at 8:30 a.m. EST Monday.

In December, orders jumped 4.6 percent. That gain was driven mostly by higher demand for military and commercial aircraft.

Aircraft orders are volatile from month to month and can cause large swings in overall durable goods orders. In January, Boeing received orders for only 2 planes, down from 183 in December. That's why economists are forecasting a large drop.

Economists look more closely at a measure in the report known as core capital goods. That excludes aircraft and military equipment and reflects business investment in equipment such as machinery and computers. Economists at Bank of America Merrill Lynch project that measure increased slightly last month, though other analysts expect a drop.

In December, core capital goods orders dipped 0.3 percent, down from strong gains of 3.3 percent in November and 3 percent in October.

Demand for U.S. factory goods weakened last spring and summer before recovering in the fall. A recession in Europe slowed exports of U.S. goods to that region. China's economy also decelerated.

Core capital goods orders actually declined 0.3 percent last year. Durable goods orders rose 4.3 percent.

This year, manufacturing is sending mixed signals. The Institute for Supply Management provided some good news earlier this month when it said that factory activity grew in January at the fastest pace in nine months. Measures of new orders and hiring both rose.

But industrial production fell in January after two months of increases, the Federal Reserve said. Much of the decline reflected a big drop in auto production that was likely temporary. The auto industry is coming off its best year for sales in five years. Sales continue to rise, so production will likely rebound in February.

The Good Business Issue
blog comments powered by Disqus