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US Durable Goods Orders Rebound Sharply in January

H.S. Borji
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US durable goods orders rose faster than forecast in January following two consecutive months of decline, a sign manufacturing activity was beginning to stabilize amid volatile global markets and weaker energy prices.

Orders for manufactured goods meant to last three years or more increased 2.8 percent in January, following a revised drop of 3.7 percent in December, the Commerce Department reported today in Washington. Economists forecast an increase of 1.7 percent.

January was the first time durable goods had increased in three months, underscoring uneven factory activity. Energy producers have cut back production to account for the large drop in energy prices, which have shown signs of stabilizing this month.

Gains in January were driven by higher demand for equipment including machinery and computers, a sign domestic factors were underpinning factory activity.

Transportation equipment rose 9.1 percent in January following two consecutive monthly declines. Excluding transportation, new orders rose only 0.3 percent.

Excluding defense equipment, new orders were up 3 percent, official data showed.

New orders for non-military capital goods excluding aircraft – a gauge of business spending – rose 0.6 percent in January following a 0.7 percent decrease the month before.

Shipments of non-military capital goods excluding aircraft, which is used in the calculation of gross domestic product, declined 0.3 percent after rising 0.3 percent in December.

A separate gauge of US manufacturing activity released earlier this month suggested factory activity cooled in January, a sign uneven global demand continued to weigh on domestic producers. The Institute for Supply Management’s gauge of US manufacturing activity eased declined to 53.5 from 55.5.

Industrial production – a broader measure of factory activity that includes manufacturing, mining and utilities – rose only 0.2 percent in January, following a 0.3 percent drop the previous month, the Board of Governors of the Federal Reserve System reported on February 18. Manufacturing production, which represents 12 percent of US GDP and around 75 percent of industrial production, advanced 0.2 percent.

Mining production declined 1 percent in January, while utilities output rose 2.3 percent, official data showed.

In a separate report on Thursday the Commerce Department said consumer prices declined faster than forecast in January, as lower gas prices continued to dampen inflation. The consumer price index dropped 0.7 percent from December, the third consecutive month of negative inflation and the biggest drop since December 2008. In annualized terms, the consumer price index declined 0.1 percent following December’s 0.8 percent increase. That was the biggest year-on-year decline since 2009.

So-called core inflation, which strips away volatile goods such as food and energy, increased 0.2 percent in January.

Weaker than forecast inflation is expected to give the Federal Reserve more ammunition to keep interest rates near zero. Fed Chair Janet Yellen told Congress this week the central bank would not raise interest rates “for a couple of meetings,” as policymakers need to be “reasonably confident that over the medium-term inflation will move up toward its 2-percent objective.”

The Federal Reserve’s next policy meetings are scheduled for March 17-18.

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