In a surprising turn of events, US durable goods orders surged beyond expectations last month, primarily buoyed by a notable recovery in civilian aircraft, according to government data released on Thursday. The Census Bureau reported that orders for tangible items, typically having a lifespan of at least three years, escalated by 3.1% month-over-month, reaching a remarkable total of $286 billion in January.
This growth surpassed the consensus forecast, which anticipated a more modest 2% increase based on a survey by Bloomberg. It’s worth noting that in December, new orders had actually decreased by a revised 1.8%, painting a stark contrast to the current upward trend. The transportation equipment sector experienced a significant rebound, with new orders exploding by 9.8% in January after facing two consecutive months of decline.
The most striking increase was seen in nondefense aircraft and parts, where orders surged about 94%, following a steep drop of 29% in December. This dramatic turnaround highlights the volatility often associated with aircraft investment, which has significantly influenced business investment in equipment, especially in light of last year’s strike at Boeing (BA).
As Bernard Yaros, lead US economist at Oxford Economics noted, this sector is poised to provide a substantial lift to first-quarter growth as shipments of aircraft and their components recover more rapidly than previously anticipated. Meanwhile, orders for defense aircraft and parts witnessed a modest rise of 1.9%, while the motor vehicle segment fell by 2.5%.
When excluding transportation from the overall calculation, orders remained virtually flat month-over-month, disappointing the Wall Street consensus prediction of a 0.3% increase. Notably, new orders for computers and electronic products showed a gain of 1.7%, whereas fabricated metal product orders dropped by 1.2%. In the context of shipments, the report indicated that manufactured durable goods shipments experienced a slight uptick of 0.4%, reaching $288.2 billion last month.
Orders for nondefense capital goods rose by approximately 13%, with shipments advancing by 3.2%, in accordance with government data. Conversely, defense capital goods orders underwent a decline of 1.5%. The patterns emerging from this latest data offer a nuanced perspective on the health of the US manufacturing sector, particularly in relation to investment dynamics within the aerospace industry..