Transportation equipment accounted for the lion’s share of the durable goods order increase in December, the U.S. Census Bureau reported today.
New orders increased $10 billion or 4.6% in December to $230.7 billion, after a gain of 0.7% in November. The solid increase outperformed consensus forecasts of a 3.2% rise.
Transportation had the largest increase - $8.1 billion or 11.9% to $75.9 billion. New orders for military aircraft were up 56.4% while orders for civilian aircraft were up 10.1%.
“Excluding the volatile transportation component, orders were up a still solid 1.3% and, in a positive for U.S. manufacturing prospects, demand was strong in early-stage sectors such as primary and fabricated metals,” observed Cliff Waldman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI).
Shipments of manufactured durable goods also increased in December, up $2.9 billion or 1.3% to $230.6 billion. Shipments increased 1.8% in November.
Unfilled orders for durable goods rose $8.2 billion or 0.8% to $992 billion. Transportation equipment again drove this increase, with $9 billion or 1.6% rise to $588.8 billion.
After 14 consecutive increases, inventories were down slightly, by $0.1 billion to $374.5 billion. Machinery had the largest decrease, down $0.4 billion or 0.6% to $66.1 billion.
MAPI’s Waldman said uncertainty over the fiscal cliff had impacted the December results, contributing to what was “already a weakening capital investment picture.”
“New orders for non-defense capital goods excluding aircraft, a proxy for business equipment spending, was up by only 0.2% in December after two promising months,” said Waldman. “For the year, business equipment spending fell by 0.3%. The sharp decline of 3.6% in demand for machinery during 2012 highlights the negative response of business decision makers to great policy and economic uncertainties.”
Manufacturers will face continued uncertainty this year, warned Waldman.
“The U.S. fiscal picture, while somewhat less threatening, remains a difficult uncertainty, and whatever the outcome of continued negotiations has been and will continue to be a drag on U.S. economic growth. But the underlying economy is showing some improvement, particularly from the housing market, whose modest but seemingly durable turn will be broadly beneficial to the economic picture,” he noted.
“The global economic situation, while still sluggish, is somewhat more stable as policymakers in the Eurozone have calmed what could have been a chaotic financial situation and as the slowdown in China has clearly bottomed. All told, U.S. manufacturing is likely to experience slow but steady growth during 2013.”