Durable-Goods Orders Drop 4% in Jan, Biggest Fall In 3 Years

By : Subscribe to Joseph's | February 28, 2012 7:34 PM IST

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Orders for factory goods fell in January, as demand items including machinery to aircrafts fell. The 4 percent decline marks the largest drop since January 2009, ending two consecutive months of increases and suggesting the U.S. economy may not be quite as robust as many experts believe.

Businesses ordered $206.1 billion new factory goods, an $8.6 billion decline, the Commerce Department reported Tuesday, exceeding economists' forecasts of a 1 percent decline, following a revised 3.2 percent increase in December.

Non-defense capital goods, considered an indicator of future business growth, fell 4.5 percent.

The overall results were brought down by a 19 percent fall in civilian aircraft orders, part of an overall 6.1 percent fall in transportation orders. Boeing, the world's largest aircraft maker, saw orders drop to 150 from 287 in December.

Excluding transportation, orders fell 3.2 percent, falling well short of economists' expectations of no change in December's figures. Machinery orders declined 10.4 percent, the steepest drop since January 2009, when the economy was in the throes of a recession.

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Non-defense goods orders excluding aircraft fell 3.1 percent, the biggest drop since April 2009.

Durable goods include a range of products meant to last at least three years.

"In recent months, the major wild card in new orders has been fluctuations in motor vehicles and aircraft," Steven Wood, president of Insight Economics LLC in Danville, Calif., told Bloomberg before the figures were released. "Hard-good orders have been climbing, albeit irregularly, for the past two years but remain well below their pre-recession peak."

The decline may have been driven by the expiration at the end of December 2011 of a tax incentive that allowed the full depreciation of equipment purchases, slowing down investment in January, Benjamin Reitzes of BMO Capital Markets told Bloomberg.

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