U.S. factory orders rose above expectations in December. On a sequential basis, factory orders rose 1.8 percent, as compared with the consensus expectations of a rise of 1.2 percent. The orders for durable goods remained largely unrevised at 2.4 percent. The nondurable goods orders rose surprisingly by 1.1 percent, coming above the expectation of no change.
However, the unexpected rise in the nondurable area was not encouraging, as it was due to a downward revised reading for November. Moreover, much of the growth in December was seen in the petroleum and coal category, where the rise of 4.5 percent was most likely influenced by increase in prices. Stripping petroleum and coal, orders for nondurable goods rose 0.2 percent. A rise is certainly welcome, but the most advance after a net fall in the prior three months did little to change the recent pattern of sluggish results. Nondurable orders excluding petroleum and coal stayed below the recent peak in August. After rising from April to August in 2019, nondurable orders excluding petrol have stalled.
The huge rise in durable goods orders was mainly focused in the transportation category, boosted by sharp rise in defense-related aircraft and miscellaneous transportation items. The detail in today’s report indicated the sharp rise in miscellaneous items showed a burst in bookings for ships and boats, where spikes occur from time to time.
Excluding transportation, durable orders dropped 0.1 percent, continuing the flat to downward drift that has been clear throughout 2019, noted Daiwa Capital Market Research in a report. Excluding aircraft, new orders for nondefense capital goods dropped 0.8 percent, and like durable orders ex-transportation, has been falling in the past year or so.
