Transportation Puts the Brakes on Durable Goods in January as Core Orders Rise

Andrew Klips |

The Commerce Department said Wednesday morning that orders for durable goods, items from toasters to aircraft that are meant to last more than three years, contracted in January on smaller bookings for aircraft, although, excluding the volatile segments, orders for long-lasting goods expanded for the fifth straight month.

Meanwhile orders from December were downwardly revised to a 3.7 percent increase from the 4.3 percent gain originally estimated last month.

The report showed that new orders fell by $11.8 billion, or 5.2 percent, to $217 billion for the month, following a 3.7 percent increase in December. Transportation was the main anchor, plunging 19.8 percent for the month compared to December. Excluding transportation, new orders increased by 1.9 percent, the biggest monthly rise in over a year. New orders for machinery paced all with a 13.5 expansion from the month earlier.

Orders for so-called “core capital goods,” which don’t count defense or aircraft, rose 6.3 percent from December to January, representing the biggest one-month move in more than two years.

The drop in overall durable goods orders was not a big surprise as orders for airplanes had spike in December. Boeing (BA) reported orders for more than 180 aircraft that month, compared to only 2 in January.

Economists were expecting a decrease in overall durable goods orders between 4 and 5 percent. Excluding transportation, the 1.9 percent reported far exceeded economist predictions of a modest 0.2 percent increase.

Durable goods orders have been volatile recently as businesses shift manufacturing and inventories as they wait for the government to reach some resolve regarding automatic spending cuts set to hit on March 1. Prior months have stirred a panic from Washington as well with concerns over the fiscal cliff, keeping businesses cautious about expanding production. Overall, though, it seems that companies have been willing to shelf any worries as gauged by “core” orders steadily rising for nearly half a year.

Shipments of durable goods fell 1.2 percent after gaining the previous four months, including 0.5 percent in December. Again, transportation was the culprit in the decline, falling 2.3 percent in January.

Inventories increased 0.2 percent, their 15 rise in the past 16 months. Transportation played a big role here as well, with a 0.9 percent increase.

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