Numbers: Manufactured goods orders fell 4.5% in January on slumping bookings for volatile passenger jets. However, business investment rose at the fastest pace in five months in another sign of the economy’s strength early in the new year.
Economists polled by the Wall Street Journal had expected durable goods orders to decline by 3.6%. These are products like cars, planes, and computers that are supposed to last at least three years.
Transferring aside, however, new orders rose 0.7% last month.
Moreover, a key measure of business investment increased at the fastest pace since last summer.
Demands rise in an expanding economy and contract when growth is weak.
Key details: Orders for new commercial aircraft tend to rise and fall at the end of one year and the beginning of another.
They secured 250 contracts in December, which led to a 5.1% rise in US Durable Goods Orders. As expected, orders in January dropped to just 55.
New car and truck orders rose by a slight 0.2% last month.
The transportation sector is a large and volatile category that often exaggerates the ups and downs of industrial production. Outside of transportation, orders rose in every major category except communications equipment.
More importantly, business investment jumped 0.8%, marking the fastest gain since last August. Investment fell in three of the last four months of 2022.
However, the annual rate of growth in business investment slowed again to 4.3% from 5% – less than half the pace compared to last year.
These orders exclude military spending and the auto and aviation industries.
The Big Picture: US manufacturers posted slower orders and are growing at a slower pace than last year, but they’re still expanding.
However, the outlook for 2023 is increasingly uncertain, due to higher interest rates arranged by the Federal Reserve to tame soaring inflation.
High borrowing costs reduce demand for high-cost manufactured goods and discourage investment.
I look forward: The durable goods report “adds to a series of recent data points that the economy continued to grow early in the first quarter,” said Oren Klashkin, chief US economist at Oxford Economics.
He added, “Looking ahead, we expect durable goods activity to ease gradually in the coming months, as consumers cut spending on goods and businesses restrict investment as borrowing costs rise and economic stress continues.”
Market reaction: Dow Jones Industrial Average
and the S&P 500
It is set to open higher in Monday’s trading.
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