WASHINGTON (AP) — Businesses cut back sharply on their orders for long-lasting manufactured goods in December with a key category that signals business investment plans falling by the biggest amount in five months.
Orders for durable goods fell 4.3 percent in December compared with November, when orders had risen 2.6 percent, the Commerce Department reported Tuesday. The weakness was led by a big 17.5 percent drop in the volatile category of commercial aircraft.
There was widespread weakness in a number of categories including a 1.3 percent decline in demand for non-defense capital goods excluding aircraft. This category is viewed as a proxy for business investment plans.
Some of the December weakness probably reflected a temporary dip following November's big jump which had been driven by businesses rushing to take advantage of expiring tax breaks.
The December decline came as a surprise to economists. The consensus view among economists was that orders would post a moderate rise reflecting what they believe is an improving outlook for U.S. manufacturers.
Jennifer Lee, senior economist at BMO Capital Markets, said that a good portion of the decline in commercial aircraft orders resulted from the government's seasonal adjustment process which trimmed a tripling in demand for airplanes that Boeing reported for the month.
She said demand should rebound in coming months although it appeared that businesses were proceeding with caution at the moment.
In addition to the big drop in orders for commercial aircraft, orders for motor vehicles and parts fell 5.8 percent. That was likely a temporary dip given the strong sales that automakers are enjoying.
Orders for primary metals such as steel fell 2.1 percent while demand for computers and other electronic products dropped 7.8 percent. Orders for machinery rose 0.8 percent.
A key gauge of manufacturing activity remained near a 2½ year high in December. The Institute for Supply Management said its manufacturing index registered 57 in December, only slightly down from a 57.3 reading in November. The December level was still the second-highest reading since April 2011. Any reading above 50 signals growth in manufacturing.