Aircraft Orders Lift Durables 2.2%

A surge in demand for new commercial aircraft put some lift under the wings of manufacturing orders in December, but not enough to mask a loss of momentum in business, a government report Friday showed.

The Commerce Department said the value of new orders for durable goods--items intended to last three years or more--climbed a surprisingly strong 2.2% to $214.33 billion after a 1.8% rise in November.

All the end-of-year gain in overall orders came from aircraft. Excluding transportation items such as aircraft and automobiles, December orders dropped 1.4% after a scant 0.3% rise in November and a 3.2% plunge in October.

The president of the National Manufacturers Assn., Jerry Jasinowski, said the report highlighted the risk to the economy from a developing industrial slowdown, and called for another aggressive interest-rate cut next week.

The Federal Reserve announced a surprise half-percentage-point reduction on Jan. 3, between its regularly scheduled policy meetings. It is expected to cut rates again, possibly by another half point, at the conclusion Wednesday of a scheduled two-day meeting of its Federal Open Market Committee.

The durable goods report offered numerous signs of sluggish manufacturing activity, already evident from a variety of other sources including announcements from U.S. auto makers that they are cutting assembly rates as vehicles pile up on dealers’ lots.

The Commerce Department said shipments of finished goods, a gauge of current activity on the factory floor, declined for a third straight month in December, falling by 0.5% to $206.52 billion after a 1.15% decrease in November.

It was the first time since mid-1989--before the last recession, in 1990-91--that shipments have dropped for three months in a row, a Commerce Department official said.

New orders for industrial machinery, a component that includes computers, fell 5.3% in December after a 0.3% drop in November. Primary metals orders fell 3.5%, after a 2.6% decrease in November.

Not all was bleak, though. Transportation orders soared 14.6% to $54.21 billion in December after jumping 7.3% in the prior month.

Electrical equipment orders were up 2.4% on top of a 6.75% jump in November.

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Durable Goods

New orders, in billions of dollars, seasonally adjusted:

December: $214.3 billion

Source: Commerce Department