Private sector demand for capital goods jumped higher in January, signaling that U.S. manufacturing started the year on a steadier footing before the rise of coronavirus concerns.
Many economists see orders for core capital goods, nondefense capital goods excluding aircraft, as a proxy for business investment. These rose 1.1 percent in January after a decline in December and a flat November, according to Commerce Department data released Wednesday. Compared with a year ago, these are up 1.4 percent.
Economists had expected another month of contraction in January.
This would seem to indicate that business investment, which had been sluggish last year and showed some signs of stalling in the final months, might have been recovering as the new year began. The data is from January, however, meaning it does not reflect the global outbreak of the coronavirus and its potential economic fallout.
Overall orders for durable goods, products that generally last three years or longer, fell in January by two-tenths of a percentage point. Economists had forecast a steeper 1.5 percent decline. Excluding transportation new orders rose 0.9 percent, also better than expected. Excluding defense, new orders were up 3.6 percent, indicating strong private sector demand.
New orders for machinery were up 2.1 percent, ending two consecutive months of contraction. Orders for computers were up a sharp 8 percent. Orders for transportation equipment fell 2.2 percent, with auto orders falling 0.8 percent and auto-shipments dropping 0.7 percent.
There was a sharp rise in non-defense orders for aircraft in parts, which is surprising given the ongoing production halt at Boeing. This could be a quirk of timing in the data or a perhaps a sign that Boeing has ramped up buying from suppliers in anticipation of restarting production of the 737 Max.