WASHINGTON (Reuters) – New orders for U.S.-manufactured goods dropped in December, pulled down by a decline in bookings for civilian aircraft, but demand elsewhere was marginally firm.
Factory orders tumbled 0.9% after a revised 0.8% decline in November, the Commerce Department’s Census Bureau said on Tuesday. Economists polled by Reuters had forecast factory orders would fall 0.7% after a previously reported 0.4% drop in November. Factory orders were unchanged on a year-on-year basis in December.
Manufacturing, which accounts for 10.3% of the economy, has been constrained by the Federal Reserve’s aggressive interest rate hikes in 2022 and 2023. It has shown signs of revival as the U.S. central bank started easing monetary policy.
The Institute for Supply Management’s manufacturing PMI swung into growth territory in January for the first time in more than two years. But that nascent recovery is threatened by additional U.S. tariffs on imported Chinese goods, which come into effect on Tuesday. A 25% tariff on most Canadian and Mexican goods has been delayed until next month.
Economists have warned that the tariffs will fan inflation and limit the scope for the U.S. central bank to cut rates this year. Tariffs are also expected to hurt the construction industry, and lead to layoffs across the broader economy.
The Fed lowered rates by 100 basis points last year before pausing in January amid uncertainty about the economic impact of President Donald Trump’s policies, including deportations of undocumented and other migrants.
Civilian aircraft orders decreased 45.7% in December, contributing to the 7.4% decline in orders for transportation equipment. Excluding transportation equipment, orders rose 0.3%.
The government also reported that orders for non-defense capital goods excluding aircraft, seen as a measure of business spending plans on equipment, gained 0.4% in December.
They were revised down from the previously reported 0.5% increase. Shipments of core capital goods advanced 0.5% instead of 0.6%, as estimated last month.
Nondefense capital goods orders decreased 7.9%, rather than 7.8%, as initially reported. Shipments of those goods increased 3.4% rather than by the previously estimated 3.5%.
Business spending on equipment contracted in the fourth quarter after double-digit growth in the July-September quarter, weighed down by aircraft deliveries.
(By Lucia Mutikani; Editing by Paul Simao)
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