WASHINGTON- Orders for long-lasting US manufactured goods fell by the most in nearly four years in January, while business investment on equipment appeared to have eased, signs that the economy lost momentum at the start of the year.
Concerns about the economy’s outlook, especially the labor market, and the upcoming presidential election were uppermost in consumers’ minds in February resulting in confidence retreating after three straight monthly increases. The decline in confidence reported by the Conference Board on Tuesday was despite inflation expectations over the next 12 months falling to the lowest level in almost four years.
The reports joined a stream of weak data, including retail sales, housing starts and manufacturing production. Some of the softness has been blamed on freezing temperatures last month as well as difficulties adjusting the data for seasonal fluctuations at the start of the year. Nonetheless, economists are not forecasting a recession this year.
“Business capex lays the seeds for future economic growth as the expenditures enable companies to invest more to meet the demand for their goods and services down the road,” said Christopher Rupkey, chief economist at FWDBONDS in New York. “While economists have taken down their recession warnings, business leaders with boots on the ground are less certain of the economy in the future.”
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, plunged 6.1 percent last month amid a sharp drop in commercial aircraft bookings, the Commerce Department’s Census Bureau said. That was the largest decline since April 2020, when the economy was reeling from the first wave of COVID-19 infections.
Data for December was revised lower to show orders falling 0.3 percent instead of being unchanged as previously reported.
Economists polled by Reuters had forecast durable goods orders tumbling 4.5 percent . Orders fell 0.8 percent year-on-year in January.
Civilian aircraft orders plummeted 58.9 percent last month after rising 1.0 percent in December. Boeing reported on its website that it had received only three orders for commercial aircraft in January, sharply down from 371 in December.
The planemaker is under pressure after a cabin panel blew out on an Alaska Airlines jet mid-air in early January. The Federal Aviation Administration last month barred Boeing from expanding production of its best-selling 737 MAX narrowbody planes to improve quality control.
Overall transportation orders dropped 16.2 percent last month after slipping 0.6 percent in December. Orders for motor vehicles and parts fell 0.4 percent . Excluding transportation, durable goods orders fell 0.3 percent last month after dipping 0.1 percent in December.
There were decreases in orders of primary and fabricated metals. Machinery orders were unchanged. But orders for computers and electronic products increased 1.4 percent , while those for electrical equipment, appliances and components rose 0.9 percent.
Though there are signs that manufacturing, which accounts for 10.3 percent of the US economy, is stabilizing after production eased in 2023 amid 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022, a full recovery is still a long way away. While the US central bank is expected to start cutting interest rates this year, policymakers have indicated that they are in no rush to lower borrowing costs. – Reuters
