Factory Orders results for January were released Monday and showed a decline in line with December’s numbers. The drop of 1% was less than expected following the 3.7% decline in Durable Goods Orders evidenced in the Advance Report released last Tuesday. Durable Orders make up close to 50% of Factory orders. That decrease is blamed on a reduction of companies investment in equipment and machinery in the first month of the new year. The decline had been expected to have been 1.3%. The full report, which is seen as a good indicator of the growth of activity in the manufacturing sector provided disappointing results in contrast with the more positive consumer confidence report that was released last week.
The fall which comes after a 1.1% and 2.2% increases in January and November respectively could be viewed as an indication of a slowing manufacturing sector. This would be a blow to those who see manufacturing as a driving force in the United States’ economic recovery. The sector added 13% of all new jobs last year and was accountable for about 20% of new jobs created in January.
The decline could also be simply a leveling off of large gains seen in previous months combined with a fall in uneven annual factors. One such explanation is the drop in orders in the non-defense air industry, whose orders fell by the biggest number, 6.1% or 3.8bn, almost 45% of the total drop in Durable Goods Orders, 8.6bn. The increase in non-durable goods of 1.3% seen in this report has much to do with the increases in gasoline prices owing to instability in the Middle East. The report came off better than expected, many forecating over 2% of a decline.
The Factory Orders report takes into account Durable and non-Durable Goods Orders. At the present time durable goods orders show for around 54% of total factory orders. Because of this already available data, this report has been largely predictable since the release of the Durable Orders numbers last week.