U.S. durable goods orders fell sharply in December as the energy industry slump and drag from a strong dollar spilled over into manufacturing.
The 5.1% drop reported Thursday by the Commerce Department was the largest since August 2014 and far exceeded the 1.5% expected by economists. For 2015 as a whole, durable goods orders slipped 3.5%, the first annual decline since 2009, when the economy was just emerging from recession.
“U.S. companies are cutting investment sharply, and the key worry is that it seems to be spreading beyond the oil sector,” Thomas Costerg, an economist at Standard Chartered Bank, told the New York Times. “And in the meantime, consumers are missing in action, not able to offset the huge drag from the energy sector.”
Economists said the grim durable goods orders report could increase the Federal Reserve’s concerns about the impact of global headwinds and the fallout from the dollar, which has gained 11% against the currencies of the United States’ main trading partners since last January.
On Wednesday, the Fed said economic growth slowed late last year and noted that business fixed investment has been increasing at a “moderate” pace in recent months.
The durable goods drop was broad-based, with orders for transportation equipment falling 12.4% in December and bookings for nonmilitary aircraft plummeting 29.4%. “The drop in aircraft orders is surprising as Boeing received orders for 223 aircraft in December, up from 89 planes the previous month,” the NYT said.
Orders for nondefense capital goods excluding aircraft fell 4.3% in December. The category was down 3.9% in 2015 from a year earlier, indicating that firms pulled back on capital investments.
“That is a worrisome sign because such spending is both seen as barometer of businesses’ confidence in the economy and as necessary to boost workers’ productivity and overall economic output in the longer run,” the Wall Street Journal said.
Weak data on retail sales, industrial production, exports, and business inventories have also suggested that the economy slowed sharply in the fourth quarter, but the labor market remains solid. First-time filings for jobless benefits retreated from a six-month high last week, other data showed on Thursday.