Factory Orders Fall as Aircraft Demand Dives

New orders for U.S.-manufactured goods fell in January, pulled down by a plunge in civilian aircraft bookings, but increases in machinery and a range of other products suggested that manufacturing could be regaining its footing.

The report from the Commerce Department Monday also showed shipments of manufactured goods rebounding after two-straight monthly declines, while inventories were unchanged.

It followed in the wake of an Institute for Supply Management survey last week showing that manufacturing, which accounts for 11.3% of the economy, contracted for a fourth-straight month in February, though the pace of decline slowed and new orders improved from a more than 2-1/2-year low.

Factory orders dropped 1.6% after increasing 1.7% in December. Economists polled by Reuters had forecast orders declining 1.8%. Orders rose 4.3% on a year-on-year basis in January.

With the Federal Reserve expected to keep hiking interest rates into summer, a swift turnaround in manufacturing is, however, unlikely. Manufacturing is also being undermined by the dollar's past appreciation against the currencies of the United States' main trade partners and softening global demand.

The drop in factory orders in January mostly reflected a 13.3% decline in transportation equipment, which followed a 15.8% jump in December. Transportation equipment orders were weighed down by a 54.5% tumble in orders for civilian aircraft. Motor vehicle orders increased 1.3%.

Orders for machinery shot up 1.6%, while bookings for computers and electronic products rose 0.6%. Orders for electrical equipment, appliances and components surged 1.3%. There were also gains in orders for primary metals, fabricated metal products, as well as defense aircraft.

Shipments of manufactured goods increased 0.7%, the biggest gain since August, after falling 0.6% in December. The stock of manufactured goods at factories was unchanged after rising 0.4% in December. While that bodes well for future production, that could chip at gross domestic product this quarter.

Unfilled orders at factories were unchanged as a jump in unfinished work for computers and related products were offset by decreases in consumer 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, rebounded 0.8% in January 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 1.1% as previously reported.