Durable-Goods Orders Tumble in a Sign of Slowing Economic Growth

WASHINGTON (Los Angeles Times/TNS) -

Orders for airliners, computers and other long-lasting products unexpectedly declined sharply last month, a sign that economic growth probably slowed in the fourth quarter after its best six-month stretch in a dozen years.

Durable-goods orders fell 3.4 percent in December from the previous month, the Commerce Department said Tuesday.

Orders had been down 2.1 percent in November, but economists had forecast they would bounce back and increase 0.7 percent last month.

Instead, new orders fell for the fourth time in five months. The decline helped push the Dow Jones Industrial Average down 1.65 percent Tuesday.

The steep drop in durable goods in November and December is a sign the rising value of the dollar is hurting durable-goods orders by reducing demand for U.S. goods abroad, said Chris Rupkey, chief financial economist at Union Bank in New York.

He noted that the drop was not as bad in orders for non-defense capital goods, excluding aircraft. That figure, which is viewed as an indicator of business investment, fell 0.6 percent in December, the same as in the previous month.

Durable-goods orders are watched closely as a sign of manufacturing activity and future economic growth. And, overall, 2014 was a good year, with orders increasing 6.2 percent compared to the previous year.

But the figure can be volatile month-to-month, in part because expensive airline purchases are a major component and they largely depend on the flow of business at Boeing Co.

December’s decrease in durable-goods orders was driven by a 55.5 percent decline in new orders for non-defense aircraft and parts. A key factor was a drop in orders for Boeing jetliners. The aerospace giant had 174 new orders in December, down from 224 the previous month.

Excluding aircraft and other transportation equipment, new orders were down 0.8 percent last month after a 1.3 percent drop in November.

Still, the data were consistent with a slowdown in economic growth in the fourth quarter. Economists expect the Commerce Department to report Friday that the economy expanded at a 3.2 percent annual rate from October through December.

The figure would be robust compared to the generally sluggish growth since the end of the Great Recession.

But the fourth-quarter expansion would be well below the strong 5 percent annual growth rate in the previous quarter.

Combined with a 4.6 percent annual growth rate in the second quarter, the economy expanded from April through September at its fastest six-month pace since 2003.