Defense buoys durable goods
Demand for military aircraft makes for strong December
WASHINGTON — Orders to U.S. factories for bigticket manufactured goods rose in December as a big jump in demand for military aircraft offset a sharp decline in commercial aircraft that reflected Boeing’s continued problems with its 737 Max. A key category that tracks business investment fell by the largest amount in eight months.
The Commerce Department said Tuesday that orders for durable goods rose 2.4% in December, the strongest showing since August. However, excluding defense, new orders would have fallen 2.5%.
The category that tracks business investment plans dropped 0.9%, the biggest decline since a 1.1% setback in April. It fell short of all estimates in a Bloomberg survey of economists that had called for a gain.
While December’s figures ended 2019 on a more downbeat note, capital equipment orders for the full year rose 0.8% on an unadjusted basis, to $827 billion.
Shipments of nondefense capital goods excluding aircraft — a measure used in gross domestic product calculations — dropped 0.4%, also missing estimates for an advance. The report showed that the three-month annualized pace of business-equipment shipments was down 0.7% in December versus a 2.9% decline in November.
Demand for commercial aircraft fell a sharp 74.7% in December, reflecting the struggles Boeing has had with its troubled 737 Max plane since two fatal crashes.
Economists believe Boeing’s difficulties could trim overall economy growth by as much as one-half percentage point in the current January-March quarter.
The commercial aircraft drop was offset by a 168.3% surge in demand for military planes.
Orders for motor vehicles and parts dipped 0.9% leaving overall activity in the transportation sector up by 7.6% last month after an 8.3% drop in November. Excluding transportation, which can be volatile, orders would have fallen 0.1% in December after a 0.4% drop in November.
Demand for machinery fell 1.1% in December while demand for computers and related products declined 9.7%.
Durable-goods inventories rose 0.5% after a 0.4% increase in the previous month.
Recent manufacturing data have underscored the sector’s struggle to regain its footing as it struggles against several head winds. The Federal Reserve’s measure of factory output capped an otherwise sluggish year with a December gain, and the Institute for Supply Management manufacturing gauge fell last month to the lowest level in more than a decade.
Business investment has been hurt over the past year by uncertainties generated by President Donald Trump’s trade war with China. Now that agreement has been reached on a first-phase deal, there is hope that a more stable outlook on trade will get businesses to start investing again to expand and modernize their operations.
Business investment weighed on growth in both the second and third quarters, and gross domestic product data due Thursday will show whether the trend endured at year-end.