Durable Goods Orders Up in December

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January 28, 2005--According to a recent report by the Department of Commerce, new orders for durable goods in December were $200.3 billion, a 0.6% improvement from November. For the entire year, new orders were 11.6% above 2003.

"The main factor is a general improvement in the economy," said Michael Moran, chief economist at Daiwa Securities in New York. The economy grew 4.0% last year; strong, compared to a 2.0% annual average between 1975 and 2000, according to nationmaster.com.

Along with an improved economy, the weaker dollar, which increases the competitiveness of U.S.-made goods both at home and abroad, may have propelled the number of new orders. But based on the trade deficit, which is still widening, the weaker dollar has had no effect on the number of new orders. There may be a lag, however, said Moran, meaning the new orders number could improve before the deficit begins to shrink.

The two fastest growing sectors were communications equipment and computers, which had 17.8% and 8.8%, respectively, more new orders in December than in November. Aircraft orders for both domestic and military purposes were down in December, 16.7% and 32.3% respectively. Between October and December, monthly orders for defense-related goods declined from $12.6 billion to $7.6 billion.

Because airplanes carry such enormous price tags, many economists judge economic health by the number of new orders for non-defense goods excluding aircraft. Last month, that figure grew 1.8% to $64.2 billion. "This bodes well for investment spending in future," Moran said.

Shipments in December and for the year were up as well, 2.1% and 10.5% respectively. Unfilled orders, however, grew 0.5% to $551.9 billion in December, the highest level since the series began in 1992.

Last updated: Jan 28, 2005




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