WASHINGTON- New orders for US-made goods increased by the most in nearly 1-1/2 years in December, flattered by robust demand for defense aircraft, but persistently weak business spending on equipment pointed to limited scope for a sharp rebound in manufacturing.
The report from the Commerce Department on Tuesday followed on the heels of a survey from the Institute for Supply Management on Monday showing manufacturing activity rebounded in January after contracting for five straight months.
The business investment downturn could be compounded by Boeing’s suspension last month of production of its troubled 737 MAX jetliner, grounded last March after two fatal crashes, and the coronavirus outbreak, which has killed hundreds in China and infected thousands globally. These events are seen disrupting supply chains.
“The strength in (factory orders) is a little misleading,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Fundamentals haven’t improved significantly for either manufacturing or real business equipment spending.”
Factory goods orders surged 1.8 percent in December, the largest gain since August 2018.
Data for November was revised down to show orders tumbling 1.2 percent instead of dropping 0.7 percent as previously reported. Excluding defense, factory orders dropped 0.6 percent in December after edging up 0.1 percent in the prior month.
Economists polled by Reuters had forecast factory orders would increase 1.2 percent in December.
Factory orders fell 0.6 percent in 2019. While business sentiment has improved as trade tensions between the United States and China have eased, confidence remains subdued.
Washington and Beijing signed a Phase 1 trade deal last month, but US tariffs on $360 billion of Chinese imports, about two-thirds of the total, remained in place.
Underlying weakness in manufacturing was underscored by a 0.5 percent jump in inventories at factories in December. That was the biggest increase in factory inventories since last January and followed a 0.3 percent rise in November. — Reuters
