U.S. Factory Orders Jump More Than Expected

New orders for U.S. manufactured goods showed another solid monthly increase in December, the eighth straight month of rising orders and the latest sign that the U.S. economy is on a stronger footing than previously thought.

Factory orders rose 1.1 percent in December, much better than the 0.7 percent rise forecast by economists. The November figure was revised up to show a 1.3 percent rise from the initial estimate of 1 percent.

The revision to November means December’s outperformance is even more impressive. Orders rose by more than expected off a higher baseline.

The figures come from a monthly report released by the Commerce Department on Thursday.

Orders for machinery, also up eight consecutive months, led the increase, rising 2.7 percent to $33.4 billion. New orders for manufactured nondurable goods increased $4.1 billion or 1.7 percent to $247.1 billion.  Durable goods orders rose 0.5 percent to $246.4 billion, beating the earlier estimate of a 0.2 percent gain.

But if we focus on consumer goods, the picture is different. Orders for consumer durables rose 2.9 percent in December, while nondurable consumer goods orders rose 2.2 percent. This suggests that consumer demand remains strong despite the pandemic and recent sluggishness in the labor market.

Despite the increases, factory orders have still not recovered to prepandemic levels. Compared with a year ago, orders are down 6.6 percent.

Orders for non-defense aircraft are down 116 percent and fell 51 percent in December. For the year 2020, this category was actually negative $17 billion because so many orders were canceled.

New orders for nondefense capital goods excluding airlines—often considered a proxy for business investment—rose 0.7 percent.

Orders for computers and information technology were strong last year, boosted by households, schools, and businesses adjusting to remote operations. Information technology orders ended the year 4 percent above the previous year’s level but were unchanged from November. Orders for computers actually fell in December, declining 3.2 percent, but the full-year figure shows a gain of 6.7 percent compared with a.year ago.