Orders drop again

January 27, 2015 09:05 AM

Orders for business equipment unexpectedly fell in December for a fourth month, signaling a global growth slowdown is weighing on American companies.

Bookings for non-military capital goods excluding aircraft dropped 0.6% for a second month, data from the Commerce Department showed today in Washington. Demand for all durable goods -- items meant to last at least three years -- declined 3.4%, the worst performance since August.

Slackening demand from Europe and some emerging markets is probably weighing on orders, making companies less willing to invest in new equipment. At the same time, brightening American consumer attitudes are leading to gains in purchases of big- ticket items such as automobiles and appliances that can ripple through the economy and underpin manufacturing.

“It’s a broad-range weakness,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who is the second-best forecaster of capital goods orders for the past two years, according to data compiled by Bloomberg. “It likely reflects some of the weakness in some other parts of the world.”

Stock-index extended an earlier decline after the report. The contract on the Standard & Poor’s 500 Index maturing in March dropped 1.2% to 2,029.5 at 9:04 a.m. in New York.

Broad-Based Decline

Bookings dropped last month for machinery, computers and commercial aircraft, Tuesday’s report showed. Demand for automobiles was one of the few bright spots.

The December figures mark the longest streak of declines in orders for non-military capital goods excluding aircraft since the seven months ending in September 2012.

Excluding transportation equipment, which is often volatile from month to month, bookings decreased 0.8%, the data showed. Demand for non-defense goods fell 3.2%.

The median forecast of 80 economists surveyed by Bloomberg estimated total durable goods orders would rise 0.3%, with projections ranging from a 3.5% drop to a 2% gain. Orders for non-defense capital equipment excluding aircraft were projected to rise 0.9%.

Shipments of non-military capital goods excluding aircraft, used in calculating gross domestic product, decreased 0.2% in December after falling 0.6% the prior month.

This morning’s data are the latest hint at the trend in business investment before fourth-quarter gross domestic product figures are released Jan. 30 from the Commerce Department.

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