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US Factory Orders Fall as Transportation Demand Declines

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US Factory Orders Fall as Transportation Demand Declines

New orders for manufactured goods fell in December, driven largely by declining demand in the volatile transportation sector.

US factory orders declined 1.5 percent in December, official data from the Commerce Department showed today. The drop, which was less severe than forecast, followed a gain of 1.5 percent in November. Excluding transportation, factory orders rose 0.2 percent last month.

Durable goods orders, which have declined in two of the last three months, fell 4.2 percent. New orders for transportation equipment declined 9.7 percent last month, the biggest drop since July 2013. Meanwhile, new orders for nondurable goods increased 1.1 percent. Unfilled orders rose 0.4 percent in December, following a 0.9 percent increase the prior month. Inventories, which were up eight of the last nine months, increased 0.8 percent, government data showed.

The report comes one day after the Institute for Supply Management showed national manufacturing activity declined sharply in January, with new orders falling at the sharpest rate in 33 years. ISM’s gauge of manufacturing activity fell to an eight-month low, as severe weather gripped the continental United States for much of January.

Bad weather notwithstanding, economic activity has cooled in recent months. The US economy accelerated 3.2 percent annually in the fourth quarter, driven by inventories, job growth and consumer spending. In September and October combined, the US economy added more than 400,000 jobs, weathering the effects of the 16-day government shutdown. The US is expected to lead global recovery in 2014. According to the International Monetary Fund, US gross domestic product will expand 2.8 percent this year.

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