US factory orders fall sharply, order books shrinking

New orders for manufactured goods declined 3.4% as demand fall across a broad sector of industries

New orders for US factory goods fell for a fifth straight month in December, but a smaller-than-previously reported drop in business spending plans supported views of a rebound in the months ahead.

The Commerce Department said on Tuesday new orders for manufactured goods declined 3.4 per cent as demand fell across a broad sector of industries. That followed a 1.7 per cent decrease in November.

Economists polled by Reuters had forecast new orders received by factories sliding 2.2 per cent. US financial markets were little moved by the data.

Manufacturing is slowing, constrained by weak global demand and falling crude oil prices, which have caused some companies in the energy sector to either delay or cut back on capital expenditure projects.

Business spending on equipment in the fourth quarter was the weakest since mid-2009. The soft trend in business investment likely persisted early into the first quarter, with a report on Monday showing a manufacturing sector gauge falling in January.

Factory activity has also been hampered by an ongoing labour dispute at the nation's West Coast ports, which has caused shipment delays. But there is cautious optimism that firming domestic demand will limit the slowdown in manufacturing.

In December, factory orders excluding the volatile transportation category fell 2.3 per cent, the biggest drop since March 2013, after declining 1.3 per cent in November. In a sign of weakness, unfilled orders at factories slipped 0.8 per cent, the first fall in 10 months. The Commerce Department also said orders for non-defence capital goods excluding aircraft - seen as a measure of business confidence and spending plans - slipped 0.1 per cent instead of the 0.6 per cent drop reported last month.

Shipments of these so-called core capital goods orders, which are used to calculate equipment spending in gross domestic product rose 0.2 percent in December instead of the previously reported 0.2 percent fall.

Manufacturing inventories fell 0.3 percent after 18 straight months of increases. That could have an impact on the fourth-quarter's gross domestic product estimate, which was published last week.

Shipments of manufactured goods fell again in December, likely reflecting delays moving goods at the West Coast ports. The inventories-to-shipments ratio was 1.34, up from 1.33 in November.