Durable Goods Orders Plunge In December

Date: February 04, 2016

Orders Down 5.1%; Economists Had Forecast 0.6% Decline

According to the latest Commerce Department report, durable goods orders fell 5.1 percent in December. Economists had expected orders to fall 0.6 percent, Reuters reported. However, the sharp decline was the result of 29.4 percent decrease in commercial aircraft orders, a volatile category. Analysts attributed the remainder of the drop to falling oil prices and the strength of the dollar. Orders for nondefense capital goods excluding aircraft, viewed as a proxy for business investment, fell 4.3 percent for the month and 3.9 percent on an annual basis. Economists had expected a 0.2 percent decrease for the month. Standard Chartered Bank economist Thomas Costerg said, “US companies are cutting investment sharply, and the key worry is that it seems to be spreading beyond the oil sector and in the meantime consumers are missing in action, not able to offset the huge drag from the energy sector.” Dow Jones Newswires reported that overall, durable goods orders fell 3.5 percent, the first decline on an annual basis since the economy was emerging from the recession in 2009. USA Today reported that the “weak global economy, particularly China’s slowdown, has hurt manufacturers the past year and strengthened the dollar, which makes U.S. goods more expensive overseas.”

What This Means For Small Businesses

The manufacturing sector continues to be exposed to volatility from market forces. This is making small businesses in the manufacturing sector particularly uncertain about future plans. As NFIB Chief Economist William Dunkelberg said in the latest Small Business Economic Trends report, “The net percent of owners planning to add to inventory was unchanged at a net 0 percent for the third month in a row. With weak expectations for sales and business conditions, owners see no need to add to current stocks.”

Additional Reading

The AP also reported the story.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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