New Factory Orders Fall 1.5% In December, But Slightly Less Than Expected

New factory orders in the U.S. fell in December, but rose for the third consecutive month when the weak transportation sector was excluded. Some economists pointed to the data as reason for modest optimism after other economic data showed a severe slowdown in U.S. and Chinese manufacturing sectors.

The Commerce Department said on Tuesday new factory orders for manufactured goods dropped by 1.5 percent, which is the largest fall since July. The decrease was fueled by a reduction in bookings for transportation equipment.

November’s orders were revised to show a 1.5 percent increase instead of the 1.8 percent gain previously reported.

Economists polled by Reuters had forecast new orders received by factories falling 1.7 percent in December.

New orders for transportation equipment, however, plummeted by 9.7 percent, or the largest drop since July. The drop came after an 8.1 percent increase in November. Orders for motor vehicles fell by the most in five months, while non-defense aircraft and parts orders fell 17.5 percent.

When excluding transportation, new factory orders actually gained 0.2 percent after rising 0.3 percent in November. There were increases in orders for machinery, electrical equipment, appliances and components. Orders for primary metals fell and bookings for computers and electronic products posted their biggest drop since June 2012.

Economists now expect factory activity to slow down early this year after output grew at its fastest pace in nearly two years in the fourth quarter. This will no doubt decrease GDP growth in the second half of the year.

The Institute for Supply Management reported on Monday that its index of national factory activity dived to an eight-month low in January, with orders recording their largest drop in more than 30 years.

But some have claimed manufacturing is not slowing as sharply as suggested by the ISM survey. There also has been a steady rise in order backlogs.

Unfilled orders at the nation’s factories rose 0.4 percent in December to their highest level since the series started in 1992 and were up 0.9 percent in November.

The Commerce Department said orders for durable goods, manufactured products expected to last three years or more, dropped 4.2 percent instead of the 4.3 percent fall reported last month. Durable goods orders excluding transportation fell 1.3 percent and not 1.6 percent as previously reported.

Orders for non-defense capital goods excluding aircraft – seen as a measure of business confidence and spending plans – declined 0.6 percent instead of the previously reported 1.3 percent drop.