US Durable Goods Orders See Strong Recovery In January After December's Declines

New orders for U.S. durable goods surged nearly 5 percent in January, the highest leap in 10 months as consumer demand gained steam throughout the economy.

The Commerce Department said Thursday that orders for long-lasting manufacturing goods — from toasters and washing machines to computers, cars and aircraft — rose 4.9 percent last month, reversing the 4.6 percent plunge in December orders.

Economists polled by Reuters had forecast only a 2.5 percent gain in durable goods orders in January following the previous month’s slump, Reuters reported. January saw the largest jump in orders since March 2015.

December’s report was weighed down by a large slump in more-volatile categories, including commercial aircraft and defense. That’s why economists projected a rebound in January, although the higher-than-expected results suggest the worst of America’s manufacturing downturn is probably over, Reuters noted.

Orders of core capital goods, which excludes defense products and aircraft, rose 3.9 percent after sliding by a revised 3.7 percent in December. Analysts watch this segment closely for clues about business spending plans. An uptick suggests a stronger company outlook and bigger consumer appetite.

Despite stronger rules for durable goods – which account for about 12 percent of the U.S. economy – America’s economic growth remains hampered by a strong dollar, weak demand in global markets and the billions of dollars in spending cuts by major oilfield service companies such as Halliburton and Schlumberger. The collapse in oil prices over the past two years has forced energy firms to tighten their belts, shelve expansion plans, and lay off thousands of workers across the oil patch.

The International Energy Agency this week said a strong rebound in oil prices was unlikely this year given the lingering glut in global crude supplies and signs of weaker-than-expected growth in China and other emerging markets.

Civilian aircraft orders surged 54.2 percent, boosting overall durable goods orders last month, the Commerce Department reported. Orders for motor vehicles and parts ticked up 3.0 percent, which other segments also saw increases in orders: primary metals, fabricated metal parts, machinery, computers, electrical equipment, appliances, components and electronic products.

But shipments of core capital goods dropped 0.4 percent in January after gaining 0.9 percent in December. The shipments are used to calculate equipment spending in the department’s gross domestic product report. Given the decline, economists might curb their estimates for first-quarter GDP growth, which are now above a 2 percent annual rate, Reuters reported.