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U.S. Durable Goods Orders Dip Amid Sharp Pullback In Defense Orders

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Reflecting a sharp drop in volatile defense orders, the Commerce Department released a report on Thursday showing a modest decrease in U.S. durable goods orders in the month of January.

The Commerce Department said durable goods orders edged down by 0.2 percent in January after spiking by an upwardly revised 2.9 percent in December.

Economists had expected durable goods orders to slump by 1.5 percent compared to the 2.4 percent jump that had been reported for the previous month.

The modest decrease in durable goods orders came as orders for defense capital goods plunged by 39.8 percent in January after soaring by 87.4 percent in December.

Excluding defense, durable goods orders surged up by 3.6 percent in January after slumping by 1.9 percent in the previous month.

The report said orders for transportation equipment tumbled by 2.2 percent in January after surging up by 8.8 percent in December.

While orders for commercial aircraft and parts skyrocketed by 346.2 percent, orders for defense aircraft and parts plummeted by 19.6 percent.

Excluding the steep drop in orders for transportation equipment, durable goods orders climbed by 0.9 percent in January after a revised 0.1 percent uptick in December.

Ex-transportation orders had been expected to edge up by 0.2 percent compared to the 0.1 percent drop originally reported for the previous month.

The bigger than expected increase in ex-transportation orders partly reflected sharp increases in orders for primary metals and machinery.

The report also said orders for non-defense capital goods, excluding aircraft, a key indicator of business spending, jumped by 1.1 percent in January after falling by 0.5 percent in December.

Shipments in the same category, which is the source data for equipment investment in GDP, also surged up by 1.1 percent in January after edging down by 0.1 percent in the previous month.

"That suggests business equipment growth was beginning to rebound in the first quarter, although that recovery could be curtailed very quickly in the event of a widespread domestic coronavirus outbreak," said Michael Pearce, Senior U.S. Economist at Capital Economics.

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