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Durable Goods Orders Weaker Than Expected
Reuters
Wednesday, January 28, 2004; 9:00 AM
By Anna Willard
WASHINGTON (Reuters) - New orders for long-lasting U.S. goods were unchanged in December, the government said on Wednesday in a weaker-than-expected report raising questions about the strength of the manufacturing recovery.
The Commerce Department said orders were flat in December after falling a revised 2.3 percent the previous month. Analysts had been expecting a solid increase of 2.0 percent.
"This is a disappointing report. We got a second straight decline, excluding transportation," said David Sloan, economist at 4CAST in New York.
The dollar weakened and U.S. Treasury bond prices climbed after the report, which is notoriously volatile, was released.
A broad range of categories suffered from weaker demand. Non-defense capital goods excluding aircraft orders -- seen as a proxy for business spending -- fell 0.4 percent.
Economists believe a sustained pickup in business spending is crucial for a long-lasting economic recovery.
Orders of computers and electronic products fell 2.7 percent and orders for fabricated metal goods fell 0.8 percent.
Helped by strong demand for cars and aircraft, a 1.4 increase in demand for transportation equipment was a bright spot in the report. Aircraft giant Boeing said it had 21 new orders in December.
Excluding transportation, orders were down 0.7 percent, while durable goods orders excluding defense rose 0.2 percent.
Shipments of goods rose 0.6 percent, after an increase of 0.3 percent in November.
For 2003 as a whole, new orders rose 2.8 percent, the first calendar-year increase since a 3.3 percent rise in 2000. New orders fell 1.9 percent in 2002.
The disappointing report will likely reinforce expectations that the Federal Reserve will leave interest rates on hold at a 45-year low of 1 percent when it meets on Wednesday to discuss monetary policy.
"This is another reason for the Fed to not change its currency monetary policy. The economy is recovering but is not roaring back," said Mark Zandi, chief economist at Economy.com.
Recent reports on the manufacturing sector have been a mixed bag. The Institute for Supply Management said its factory survey showed manufacturing growth was the strongest in 20 years.
However, the Fed said industrial production gained 0.1 percent in December, less than what was expected by the market, and the Labor Department's report on employment showed the factory sector continued to shed jobs in December.
The Commerce Department is due to release a report on new home sales at 10 a.m. (1500 GMT). Analysts are expecting sales of 1.1 million units.
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