Durables Orders Post Biggest Drop Since Oct
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Durable Goods Orders Jan Dec !Surprise: Yes !
Total Orders: -6.0% 1.2%r !Trend:Slower !
Ex-Transportation: -0.3% -2.1%r ! Growth !
Ex-Defense: -6.0% 2.3%r !Consens.:-3.5%!
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By Jonathan Nicholson
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--The manufacturing sector of the economy took another hit in January, as orders for large manufactured goods slumped sharply.
The Commerce Department said Tuesday orders for durable goods - items meant to last three or more years - slipped 6.0% in the month, more than reversing the revised 1.2% gain seen in December and marking the biggest drop since October. The December increase had previously been reported as a 2.1% gain.
The number is likely to add to pressure on the Federal Reserve to cut interest rates further. The Fed has cut rates twice so far this year and some analysts speculate it could act again before its next scheduled meeting on March 20. Fixed-income investors may cheer the durables report as a sign that an inventory backlog Fed officials have been worried about has yet to run its course, easing the path for more aggressive Fed action in coming months.
However, investor reaction may be muted ahead of the planned 10 a.m. release of consumer confidence figures by The Conference Board. Consumer sentiment is seen as a key factor in the Fed's rate-setting deliberations.
Wall Street had anticipated durables orders would drop less sharply, after having been artificially boosted by outsized gains in the aircraft sector in recent months, a factor that turned around this month. The median forecast of 16 economists surveyed by Dow Jones and CNBC called for a drop of 3.5% for January.
In the Commerce report, durables orders outside of transportation were not as weak, falling only 0.3%. Non-defense-related orders shrank 6.0%.
Orders were down in most sectors. Primary metals orders fell 0.6% while electrical and electronic equipment orders slumped 6.2%. Transportation-related orders fell 22.4% in January after rising 12.2% in December.
The only sector to post a gain in orders was industrial machinery, the category that includes computer equipment, which posted an advance of 5.7%.
Non-defense capital goods orders excluding aircraft, a category many analysts use to attempt to filter out statistical "noise" in the durables report, also showed an improvement, posting a 6.5% gain in January. That followed a 2.3% fall in December and marked the strongest monthly advance since June 2000.
Shipments of durable goods were down in the month, falling 1.7%, while unfilled orders declined by 0.2%, Commerce said.
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US Durable Goods Orders-OVERVIEW
Futures World News - February 27, 2001 08:30
--US January durable goods orders -6.0%; ex-transportation -0.3%
--US January transportation equipment orders -22.4%
--Ex-defense, US January durable goods orders -6.0%
--Ex-defense and aircraft, US Jan capital goods shipments unchanged
--Ex-defense and aircraft, US January capital goods orders +6.5%
--US January durable goods shipments -1.7%; unfilled orders -0.2%
--US January metals orders -0.6%; industrial machines +5.7%
--US January electronic equipment orders -6.2%
--US January civilian aircraft orders -49.3%
--US December durable goods orders revised to +1.2% from +2.1%
By Simon Kennedy, BridgeNews
Washington--Feb. 27--U.S. manufacturing activity continued to
deteriorate in January, with durable goods orders falling 6.0% amid sharp
drops in civilian aircraft and other transportation equipment orders, the
Commerce Department said Tuesday. The decline, the first since October,
was double the 2.8% drop projected by analysts. However, excluding
transportation, January durable goods orders slipped just 0.3%.
* * *
December's durable goods orders were revised to up 1.2% from the 2.1%
increase previously reported.
In January, durable goods shipments fell 1.7%, the fourth straight
monthly drop. Unfilled orders were down 0.2%.
Excluding defense, new orders for durable goods fell 6.0% in January.
Although erratic, the durable goods data--which measures demand for
goods designed to last three years or more--is widely watched as an
indicator of general economic health because purchases for such "big
ticket" items are usually sensitive to interest rate shifts.
Private estimates in the BridgeNews survey for January durable goods
orders ranged from down 6.0% to up 0.5%.
The contraction in orders is another sign that manufacturing is still
struggling amid high interest rates, slowing demand and spiking energy
prices.
The National Association of Purchasing Management's new orders index
dropped in 37.8 in January, its lowest level since November 1981.
In cutting interest rates by 100 basis points since Jan. 3, the
Federal Reserve has reacted to such toils and is expected to chop
borrowing costs again in coming weeks to prop up an ailing economy.
MAIN COMPONENTS:
--Transportation equipment orders fell 22.4% in January. All
components fell but the biggest decline was in civilian aircraft orders,
which plummeted 49.3%.
--Electronic and other electrical equipment orders slid 6.2%.
--Primary metals orders declined 0.6%, their fourth consecutive fall.
--However, industrial machinery and equipment orders climbed 5.7%--the
sharpest rise in a year--led by computers and office equipment.
CAPITAL GOODS, ORDERS AND SHIPMENTS:
--Shipments of non-defense capital goods, excluding aircraft, a handy
indicator of future capital spending by businesses, were flat for the
second consecutive month in January.
--New orders for non-defense capital goods excluding aircraft, said by
some to be the "core" orders series and an indicator of business
investment, were up 6.5% for the latest month. They were unchanged from a
year earlier.
Benchmark revisions to the durable goods series will be released May
25 and include data from 1992 through December 2000. End |
