Durable goods orders fell sharply in January as transportation equipment orders declined.
Orders dropped 6.1% to $276.7 billion in new orders from December, following a marginal decrease of 0.3% the previous month, according to the Census Bureau. Transportation equipment drove the decrease, falling 16.2% to $89.9 billion.
The report showed unfilled orders and inventories increased 0.2% with the transportation sector driving the increase. Additionally, nondefense new orders for capital goods decreased 19.4% to $82.7 billion.
This is the third decline in the past four months in which new orders have taken a downturn, primarily due to Boeing’s manufacturing woes. However, other capital goods orders also declined, a sign that high interest rates have continued to have an impact.
“Boeing orders dropping heavily has a definite impact. Airplane orders were very weak in January, 3 orders in total and 3 cancellations which impacted the number,” said Oscar Munoz, Chief Macro Economist at TD Securities.
Boeing, the world’s largest aerospace company, experienced a decline in both aircraft orders and deliveries. Economists say these challenges are a direct result of the Alaska Airlines incident that occurred last month, in which the door plug on one of their 737 Max 9s blew out mid-flight. The incident overshadowed the company’s otherwise strong performance in 2023.
While some economists did not predict this large an effect on new orders, most of those polled say this was anticipated and in line with the industrial space being under increased pressure.
“The data doesn’t look great where it is at currently, but if you look at the past couple of months is still improving on trend,” says Shannon Greim, lead economist at Wells Fargo.
“As we look towards this year in manufacturing, we are waiting for restrictions to ease and conditions to improve before making more capital investments. As the FED eases up on interest rates we will continue to see more improvement.”
Excluding transportation and defense, new orders decreased 0.3% and 7.6% respectively. Greim says excluding Boeing, we should expect to see a rebound in the industrial space.
Amidst the challenges, there are signs of hope for a rebound, Greim Said, specifically among orders placed for military aircraft. While Boeing caused a major blip in the numbers, there are strong signs of sustained improvement. “If you look at the underlying components, you start to see a rebound in defense aircraft there were some bright spots, and the more recent months of data are more consistent.”
