“Durable goods orders declined 4.3 percent in December 2013, more than offsetting the 2.6 percent gain in November,” noted Daniel Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). “The reduction in orders was led by very large percentage declines in defense capital goods, civilian aircraft, computers and electronic products, and motor vehicle orders. Government austerity led to lower military equipment spending last month (which was not new), and defense capital goods orders fell 20 percent in 2013 as a whole. The reduced electronic equipment and motor vehicle orders were likely affected by the ending of accelerated depreciation.
“Nondefense capital goods orders excluding aircraft, a leading indicator for overall business equipment investment, declined 1.3 percent in December following a strong 2.6 percent gain the prior month,” he added. “The pattern of surge and setback was indicative of 2013. The fundamentals for business equipment investment are very favorable but firms remain hesitant to commit to long-term investments because of the clouds of uncertainty that persist, such as political gridlock at home and poor economic policies in our export markets abroad.
“Despite the setback in December durable goods orders, MAPI remains optimistic that the pace of economic growth will accelerate in 2014,” Meckstroth concluded. “This economic pickup will be led by a faster pace of business equipment investment.”