Orders placed with U.S. factories for business equipment rose in December for an eighth straight month, underscoring steady improvement in capital investment that’s been a bright spot for the economy.
Core capital goods orders, which exclude aircraft and military hardware, rose 0.6% after an upwardly revised 1% advance in November, Commerce Department data showed Wednesday. The median forecast in a Bloomberg survey of economists predicted a 0.5% gain, after a previously reported 0.5% November advance.
The broader measure of bookings for all durables, or goods meant to last at least three years, increased 0.2%, less than forecast as orders for commercial aircraft and defense hardware declined. Economists had expected total orders would post a stronger advance of around 1% in December. Even with that shortfall, total orders are close to their pre-pandemic levels. Orders for motor vehicles rose 1.4% in December while demand for defense aircraft jumped 5%.
The capital goods figures corroborate other recent data that show that manufacturing is exceeding expectations and investment in equipment remains strong, helped in part by ultra-low borrowing costs. Supply-chain constraints and workforce issues, such as workers calling out sick, have been restraints on production, but still-lean inventories should continue to drive output in the coming months.
“The manufacturing sector recovery is robust, supported by strong domestic spending in goods and the global industrial upturn, led by China,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a note. “We see no reason to expect this favorable outlook to change in the near-term, but the fate of the U.S. economy overall is much more contingent on the services sector, still hamstrung by covid.”