New orders for U.S.-made capital goods fell in December, while shipments fell for a second straight month, suggesting higher borrowing costs are weighing on manufacturing.
Orders for nondefense capital goods excluding aircraft, a closely watched indicator of business spending plans, fell 0.2% last month, the Commerce Department said on Thursday. Orders for the so-called core capital goods were unchanged in November.
Economists had expected core capital goods orders to fall 0.2% from the previous month; an increase of 8.3% from a year earlier.
Higher interest rates are sapping demand for goods that are mostly purchased on credit. A rising dollar and weak global demand also hurt manufacturing, which accounts for 11.3 percent of the U.S. economy. In addition, spending is also shifting towards services.
The Fed last year raised its policy rate by 425 basis points from near zero to a range of 4.25%-4.50%, the highest level since late 2007.
Shipments of core capital goods fell 0.4 percent after falling 0.2 percent in November. Core capital goods shipments calculate equipment spending in the GDP measure. Business spending on equipment contracted in the fourth quarter.
While orders for durable goods ranging from toasters to airplanes with a service life of more than three years rebounded 5.6 percent in December, that was due to a surge in volatility in the civilian aircraft category. Durable goods orders fell 1.7 percent in November.
Orders for transportation equipment rebounded 16.7 percent after falling 5.0 percent in November. Orders for motor vehicles rose 0.7 percent; orders for civil aircraft jumped 115.5 percent.
