The numbers: Orders for manufactured goods sank 4.5% in January because of a pullback in volatile passenger plane bookings. Yet business investment rose at the fastest pace in five months in another sign of strength for the economy early in the new year.
Economists polled by the Wall Street Journal had forecast a 3.6% drop in orders for durable goods. These are products like cars, planes and computers meant to last at least three years.
Yet if transportation is set aside, new orders rose a solid 0.7% last month.
What’s more, a key measure of business investment increased at the fastest pace since last summer.
Orders rise in an expanding economy and shrink when growth weakens.
Key details: Orders for new commercial jets tend to be up and down at the end of one year and start of another.
Boeing
BA,
received a flush of 250 contracts in December that drove a 5.1% surge in U.S. durable-goods orders. As expected, orders dropped off to just 55 in January.
Orders for new cars and trucks rose a scant 0.2% last month.
The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production. Outside of the transportation, orders rose in every major category except communications equipment.
More important, business investment climbed 0.8% to mark the fastest gain since last August. Investment had declined in three of the last four months of 2022.
Still, the annual rate of growth in business investment slowed again to 4.3% from 5% — less than half the pace compared to one year ago.
These orders exclude military spending and the auto and aerospace industries.
Big picture: U.S. manufacturers have recorded slower orders and are growing at a softer pace compared to last year, but they are still expanding.
The outlook for 2023 is increasingly uncertain, however, because of rising interest rates orchestrated by the Federal Reserve to tame high inflation.
Higher borrowing costs reduce demand for big-ticket manufactured goods and discourage investment.
Looking ahead: The durable-goods report “adds to a recent string of data points that the economy continued to grow early in the first quarter,” said Oren Klachkin, lead U.S. economist at Oxford Economics.
“Looking ahead, we expect durable goods activity to gradually soften in the coming months,” he added, “as consumers cut back on goods spending and businesses restrain investment as high borrowing costs bite and economic jitters stay high.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher in Monday trades.
