Durable goods orders fell primarily on the sharpest decline in over a decade in Pentagon orders for long-lasting manufactured products.
Overall orders fell to 5.2% in January to a seasonally adjusted $216.98 billion. Defense spending dropped 69.5% and demand for civilian aircraft fell 34%, all part of a routine order slowdown following a 3.7% increase in orders in December.
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The report from the Commerce Department did show underlying strength outside of the defense and aircraft categories.
So-called non-defense capital goods orders excluding aircraft rose 6.3%, the best increase in over a year that is also reflective of increased business confidence.
New orders for machinery rose 13.5%, the largest increase since May 2010. The decline in defense capital goods orders was the largest since July 2000.
Spending for defense doubled in December 2012 in preparation of the steep cuts that were to occur as part of the fiscal cliff. As a last minute agreement was reached to avoid the worst tax hikes, defense cuts were postponed until March 1.
The significant drop in civilian aircraft was due to long-term planning in the industry instead of fears over the Boeing Dreamliner, which has had problems with lithium-ion batteries.
The Dreamliner’s issues did have an effect on Boeing. The company received only two orders
for aircraft in January compared to 183 in December and 164 so far in February.