WASHINGTON – Orders for durable goods unexpectedly slumped in December by the most in five months, reflecting a broad-based retreat that raises the risk business investment will cool in early 2014.
Bookings for goods meant to last at least three years dropped 4.3 percent, exceeding the weakest forecast of 82 economists surveyed by Bloomberg, after a 2.6 percent gain in November that was smaller than previously reported, a Commerce Department report showed Tuesday in Washington. Orders for non-military capital goods excluding aircraft also declined.
The figures are difficult to square with other reports that showed factories were contributing to economic growth at the end of 2013 and into this year as companies geared up to meet more demand. While the weakness is hard to pin on bad weather, the across-the-board nature of the declines is similar to the retreat shown in employment last month that some economists said was related to the dip in temperatures.
“Clearly this is a weak report to cap off what was kind of a weak year for business investment,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh, who projected orders would decline. “We will see better business investment in 2014” as a budget agreement in Washington and pent-up demand boost business confidence and spending, Hoffman said.
Stock-index futures dropped after the report, trimming earlier gains. The contract on the Standard & Poor’s 500 Index maturing in March rose 0.2 percent to 1,779.3 at 9:04 a.m. in New York. It had been up as much as 0.6 percent earlier.
Survey results
The median estimate of economists surveyed by Bloomberg called for a 1.8 percent advance in total orders. Forecasts ranged from an increase of 10 percent to a 1.2 percent drop. The gain in November was revised from a previously reported 3.4 percent advance.
Excluding transportation equipment, where demand is often volatile month to month, orders decreased 1.6 percent, the biggest decline since March, after a 0.1 percent increase in November.
Bookings for non-military capital goods excluding aircraft dropped 1.3 percent after a 2.6 percent gain in November that was smaller than previously estimated. Demand for such products is considered a proxy for future business investment in equipment such as computers and electronics.
Shipments of those goods, a measure used to calculate gross domestic product, declined 0.2 percent in December after rising 2.3 percent the prior month. Sales were up 6.5 percent over the past three months at an annualized rate, compared with a 2.1 percent drop at the end of the third quarter, indicating business investment contributed to growth last quarter.
Boeing orders
Bookings for commercial aircraft unexpectedly declined 17.5 percent in December after rising 21.1 percent the prior month even as Chicago-based Boeing Co. showed a surge in demand. The government statistics don’t always match industry data on a month-to-month basis.
Boeing said earlier this month it received orders for 319 aircraft in December, up from 110 in November. The world’s largest planemaker also reported record jet deliveries for 2013, handing over 648 planes as carriers globally take advantage of low-cost financing to replace older models.
Bookings for computers, communications equipment, automobiles and metals all declined last month, according to the Commerce Department’s report.
Today’s durable goods report is one of the last bits of data that economists will use to finalize their growth projections. The decline in demand and revisions to previous months may prompt some analysts to reduce forecasts.
GDP forecast
The world’s largest economy grew at a 3.2 percent annualized rate in the fourth quarter following a 4.1 percent gain in the previous three months, according to the median forecast of economists surveyed by Bloomberg ahead of a Commerce Department report on Jan. 30. It would complete the strongest six months in almost two years.
Honeywell International Inc., whose product line spans aviation controls to thermostats, posted a fourth-quarter profit that beat analysts’ estimates as sales of energy-related products and turbochargers increased.
The Morris Township, N.J.-based company’s defense business “continues to be impacted by planned program ramp downs and delays in U.S.,” Chief Financial Officer David Anderson, said on a Jan. 24 conference call. Looking ahead, the backlog for defense was up “significantly” last year, Anderson said, “a positive sign as we look forward to the next five years.”
Purchases of durable goods such as automobiles, furniture and appliances have been a consumer spending bright spot as Americans replace the oldest household goods since the 1960s. Continued momentum in household durable-goods demand would provide a lift to U.S. growth in 2014.
