New orders for USA durable goods picked up in January after losing ground for two straight months, in a sign of strength among United States manufacturers.
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Orders for goods made to last more than three years grew by 4.9% month-on-month in January to reach $237.47bn, according to the US Department of Commerce, following a fall of 4.6% in the month before. Orders for motor vehicles and parts were up 3 percent, the biggest gain in six months, while demand for communications equipment registered the strongest advance since November 2014.
Orders to USA companies for long-lasting manufactured goods advanced in January at the strongest pace in 10 months.
“While providing something of a respite from the increasingly gloomy global and USA economic climate, the report continues to reveal a stubborn weakness in capital investment behavior”, explains Cliff Waldman, director of economic studies at the MAPI Foundation.
The durable goods report was the latest indication that the worst of the manufacturing downturn was probably over. The ISM’s manufacturing index stood at 48.2 in January.
Efforts by businesses to sell unwanted inventory have also meant fewer orders placed, adding to pressure on factories. The labor market remains strong despite worries about both the domestic and global economies, which have manifested themselves in a world-wide stock market sell-off that has tightened financial market conditions.
The drop in shipments in January could see economists trim their first-quarter GDP growth estimates, which are now running above a 2 per cent annual rate.
Though bets for a March interest rate hike from the Federal Reserve have been wiped out, further monetary policy tightening later in the year remains a possibility because of the jobs market resilience. Prices for US government debt rose while the dollar was little changed against a basket of currencies.
The largest month-on-month increases were recorded in orders for non-defence aircraft and parts and defence aircraft and parts, which rose by 54.2% and 84.8% each. Key subsectors that have wide-ranging intersections with manufacturing supply chains, such as primary metals, fabricated metals, and machinery, also saw a bounce-back from December weakness but were nonetheless disconcertingly below January 2015 levels. Durable goods inventories slipped 0.1 per cent last month after rising 0.2 per cent in December.
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Excluding the transportation sector, orders rose 1.8%.
