MW: Durable-goods-orders decline could mean economy shrank in fourth quarter
WASHINGTON (MarketWatch) — Demand for long-lasting “durable” goods sank in December, reflecting a downturn in business investment in 2015 that was especially acute in the waning months of the year.
Orders for durable goods fell a seasonally adjusted 5.1% last month, marking the biggest decline in a year and a half, the Commerce Department said Thursday. Economists polled by MarketWatch had predicted a 1.5% drop.
The larger-than-expected decline could result in zero fourth-quarter growth or worse, some economists said. The MarketWatch forecast had called for 0.7% growth in the final three months of 2015.
The report “tilted the scaled for fourth-quarter GDP, which now looks like it be in negative territory,” said Bricklin Dwyer, an economist at BNP Paribas.
Most ominous, a key measure of business investment fell sharply, resulting in the largest year-over-year decline since 2009.
Orders for so-called core capital-goods, which strip out aircraft and defense, tumbled 4.3% in December. For the full year they decreased 7.5%, erasing a 5.8% gain in 2015. It was the first annual decline in three years.
Companies in energy and manufacturing have culled orders amid weakening sales and profits. Energy firms have been battered by tumbling oil prices, while a strong dollar has reduced exports of manufacturers and other global-oriented U.S. companies.
Orders fell the sharpest in defense-related areas. The Pentagon, as expected, cut orders for big-ticket goods by 34% last month after a sizable 46% increase in November.
Yet bookings also declined in most major categories.
Orders for large aircraft fell 29% even though Boeing received 223 orders in the final month of 2015, its biggest cache in a year. The timing of Boeing’s BA, +0.06% orders and the government’s report, however, aren’t always in sync month to month.
In any case, the strong December for Boeing was tempered by the company’s forecast for 2016 that calls for fewer aircraft deliveries. The Wednesday announcement surprised investors and caused the company’s stock to lose 10% of its value .
Auto makers, meanwhile, had a more subdued December despite record sales in 2015. Orders dipped 0.4%.
Also read: Peak auto sales may have come and gone
Stripping out autos and aircraft, orders minus transportation declined 1.2% in December.
Shipments of core capital goods, the category used to help determine GDP, dropped 0.2% in December and they fell in all three months of the fourth quarter. The poor number might spur economists to reduce their forecasts for fourth-quarter growth.
