U.S. Durable Goods Orders Plunge 5.1% In December, Much More Than Expected

(RTTNews) - Partly reflecting a sharp drop in aircraft demand, the Commerce Department released a report on Thursday showing a substantial decrease in new orders for U.S. manufactured durable goods in the month of December.

The Commerce Department said durable goods orders plunged by 5.1 percent in December compared to the 0.6 percent drop expected by economists. The flat reading originally reported for November was also revised to a 0.5 percent decrease.

Jay Morelock, an economist at FTN Financial, said, "Since orders lead shipments, the next few months do not look like they will be getting much better."

"Most have shied from talking about a U.S. recession despite market volatility, but this is among the worst of a stretch of bad numbers in the last four weeks," he added.

The steep decline in durable good orders was partly due to weakness in the transportation sector, as orders for transportation equipment tumbled by 12.4 percent in December after slipping by 0.5 percent in November.

Aircraft orders led the way lower, as orders for defense aircraft and parts plummeted by 69.1 percent and orders for non-defense aircraft and parts dove by 29.4 percent.

Excluding the decrease in orders for transportation equipment, durable goods orders still slumped by 1.2 percent in December compared to a 0.5 percent drop in November.

The decrease in ex-transportation orders partly reflected a 5.6 percent drop in machinery orders as well as a 2.0 percent decline in orders for computers and electronic products.

The report also said orders for non-defense capital goods excluding aircraft, a closely watched indicator of capital spending, tumbled by 4.3 percent in December after falling by 1.1 percent in November.

Shipments in the same category, which are used to calculate GDP, also edged down by 0.2 percent in December after slumping by 1.1 percent in the previous month.

Next Thursday, the Commerce Department is scheduled to release its report on December factory orders, which include orders for both durable and non-durable goods.