Orders placed with U.S. factories for business equipment unexpectedly fell in December for the fourth decline in five months, suggesting a loss of momentum amid uncertainty over the trade war with China and tighter financial conditions.
Non-military capital goods orders excluding aircraft -- a proxy for business investment -- dropped 0.7% from the prior month, according to Commerce Department figures released Thursday after a four-week delay due to the government shutdown. The median forecast in a Bloomberg survey called for a 0.2% increase. The broader measure of bookings for all durable goods, or items meant to last at least three years, rose by less than estimated.
The data add to signs of a weak end to 2018 for business investment and factories, and may help explain why Federal Reserve data on industrial production showed manufacturing output shrank in January by the most in eight months.
Businesses may have been hesitating on investing in pricey equipment or placing orders to meet customer demand as the trade war with China remains unresolved and executives increasingly see risks of a recession. At the same time, the U.S. and China are working to resolve the tariffs and a March 1 deadline for higher levies could potentially slide.
Earlier December figures showed a gauge of U.S. manufacturing from the Institute for Supply Management fell by the most since the 2008 recession before bouncing back in January, while five Fed indexes of regional factory activity slumped.
Some figures that are used to calculate gross domestic product were more encouraging: Shipments of non-military capital goods excluding aircraft rose 0.5%, compared with projections for no change.
The headline durable-goods figures got a boost from the volatile transportation category, reflecting orders for civilian aircraft and parts, which jumped 28.4%. Separate data showed Boeing Co.’s aircraft orders surged in December from the prior month.
A separate Labor Department report Thursday showed unemployment-benefit claims fell more than forecast last week, suggesting the job market is regaining its footing following the shutdown.
December's three-month annualized gain for business-equipment shipments picked up to 2.3%, while for orders it slid to a 3.4% decline. Excluding transportation, which is volatile and can move on large orders in any given period, durable-goods orders rose 0.1% after a 0.2% decrease. Defense capital- goods orders fell 7%, while durable-goods inventories rose 0.2%. Orders for communications equipment fell the most since March 2017, while machinery and primary metals also showed declines. Motor vehicle and parts orders rose by the most since July.
The durable-goods report’s release, originally scheduled for Jan. 25, was delayed by the five-week shutdown. The Commerce Department said survey response and coverage rates were “at or above normal levels for this release.” A release date for January figures, originally set for Feb. 27, has yet to be determined.
By Katia Dmitrieva