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U.S. Durable Goods Orders Fall 5.2% Amid Weak Aircraft Demand

U.S. Durable Goods Orders Fall 5.2% Amid Weak Aircraft Demand

While the Commerce Department released a report on Wednesday showing that new orders for U.S. manufactured durable goods fell by more than expected in the month of January, orders actually rose by much more than expected when excluding orders for transportation equipment.

The report said durable goods orders tumbled by 5.2 percent in January after jumping by a revised 3.7 percent in December.

Economists had expected orders to fall by 4.0 percent compared to the 4.3 percent increase that had been reported for the previous month.

The bigger than expected decrease in durable goods orders was largely due to weakness in the volatile transportation sector.

Orders for transportation equipment plunged by 19.8 percent in January after surging up by 9.9 percent in December. The pullback came as orders for defense aircraft and parts plummeted by 63.8 percent, while orders for non-defense aircraft and parts fell by 34.0 percent.

Excluding the sharp drop in orders for transportation equipment, durable goods orders rose by 1.9 percent in January compared to a 1.0 percent increase in December. Ex-transportation orders had been expected to edge up by just 0.2 percent.

The bigger than expected increase in ex-transportation orders was partly due to a jump in orders for machinery, which soared 13.5 percent in January after falling by 1.8 percent in December.

Increases in orders for fabricated metal products and electrical equipment, appliances, and components also contributed to the growth.

On the other hand, orders for computers and electronic products fell by 5.3 percent, while orders for primary metals dropped by 3.6 percent.

The report also showed a 6.3 percent jump in orders for non-defense capital goods excluding aircraft, which is seen as an indicator of business spending.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "That suggests business investment started the New Year on a particularly strong note, possibly because the late fiscal cliff deal removed some of the uncertainty that had been holding businesses back."

The increase by the reading on business spending, which reflected the biggest monthly increase since December of 2011, came on the heels of a 0.3 percent drop in December.

The Commerce Department also said shipments of durable goods fell by 1.2 percent in January, while inventories of durable goods edged up by 0.2 percent.

by RTT Staff Writer

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