New orders for U.S.-made goods fell slightly more than expected in December, but manufacturing remains supported by businesses replenishing inventories.

The Commerce Department said on Thursday that factory orders decreased 0.4% in December. Data for November was revised higher to show orders increasing 1.8% instead of 1.6% as previously reported. Economists polled by Reuters had forecast factory orders slipping 0.2%. Orders increased 16.9% in 2021.

Supplies in Demand

Manufacturing, which accounts for 11.9% of the economy, is being underpinned by businesses rebuilding inventories.

Inventory investment surged at a seasonally adjusted annualized rate of $173.5 billion in the fourth quarter, the second-largest quarterly increase on record.

Most economists see more scope for inventories to rise, noting that inflation-adjusted inventories remain below their pre-pandemic level. Sales-to-inventory ratios are also low.

Inventories contributed 4.90 percentage points to the fourth quarter's 6.9% annualized growth pace.

In December, there were decreases in orders for computers and electronic products as well as transportation equipment. But orders for machinery, primary metals and fabricated metal products increased as did those for electrical equipment, appliances and components.

Shipments of manufactured goods rose 0.4% in December after increasing 0.7% in November. Inventories at factories climbed 0.3%. Unfilled orders rose 0.5% after gaining 0.8% in the prior month.

Capital Goods

The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, rose 0.3% in December instead of being unchanged as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 1.3% in December as previously reported.

Business spending on equipment rebounded in the fourth quarter.