Orders to U.S. factories outside of aircraft posted a gain in December although the increase was more modest than in November.
The Commerce Department said Thursday that orders excluding transportation rose 0.5 percent last month following a much stronger 4.5 percent November increase. A key category that signals business investment plans rose for a second straight month.
Overall demand for durable goods fell for a second straight month, down 2.5 percent in December after a 0.1 percent decline in November. However, the weakness in both months came from big declines in the volatile aircraft category.
Orders for commercial aircraft plunged 99.5 percent in December to a slight $24 million after a 59.6 percent November plunge. Orders for commercial aircraft had been $12.4 billion as recently as October. Analysts said they expected a rapid recovery in what is often a volatile category.
Overall transportation demand fell 12.8 percent in December as the big decline in commercial aircraft and a smaller drop in military aircraft was offset somewhat by a 1.7 percent increase in orders for motor vehicles and parts.
The 0.5 percent rise in orders outside of transportation was led by a solid 10.6 percent increase in demand for machinery. Orders for communications equipment posted an increase of 3.6 percent.
Demand for nondefense capital goods excluding aircraft, considered a good proxy for business investment plans, rose 1.4 percent in December following an even stronger 3.1 percent November increase.
Manufacturing activity has been expanding since the recession officially ended in June 2009 as U.S. companies have benefited not only from rising domestic demand but stronger export sales. The export sales have been helped by a declining value of the dollar against many major currencies. A weaker dollar makes U.S. products cheaper in overseas markets.
Businesses are anticipating stronger economic activity in 2011. A tax-cut package should give consumers more money to spend, and help businesses expand and modernize.
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