WASHINGTON - U.S. manufacturers saw orders for their products decline in December by the largest amount in five months, though the setback for a key category that tracks business investment was not as large as first reported.
Orders to U.S. factories fell 1.5 percent in December, the biggest drop since July, with much of the weakness coming from a plunge in aircraft orders, the Commerce Department reported Tuesday. Orders had risen 1.5 percent in November after a 0.5 percent October decrease.
Orders in a closely watched category that serves as a proxy for business investment declined 0.6 percent, a smaller fall than the 1.3percent drop estimated in a preliminary report last week. The decrease followed a sizable 3 percent jump in November, an increase spurred by an expiring tax break.
Demand for durable goods, items expected to last at least three years, fell 4.2 percent, slightly less than the 4.3 percent preliminary estimate. Orders for nondurable goods such as chemicals, paper and food rose 1.1 percent in December after a 0.4 percent November gain.
Analysts say part of the weakness in December reflected a temporary slowdown after a rush to buy capital goods in November to take advantage of expiring federal tax breaks.
Orders for all of 2013 totaled $5.82 trillion, up 2.5 percent from 2012, as manufacturing continued to recover from the recession.
Gus Faucher, senior economist at PNC Financial Services, said he expects manufacturing to expand this year at about the same pace as the overall economy, which analysts are forecasting will gain momentum.
“Consumers are gradually increasing their spending, releasing some of the pent-up demand that has developed for big-ticket items, such as cars and trucks, after being cautious with purchases,” Faucher said.
For December, demand for commercial aircraft, a volatile category, fell 17.5 percent after having risen 21.1 percent in November. While the drop in airplane orders led the declines, there was weakness in a number of categories. Orders for iron and steel fell 10 percent while demand for construction machinery was down 2.9 percent, and demand for computers and other electronic products fell 6.3 percent.
In a separate report, real estate data provider Core-Logic said Tuesday that U.S. home prices slipped from November to December, and the year-over-year increase slowed, likely a result of weaker sales at the end of last year.
Prices dipped 0.1 percent in December. It was the third straight month-to-month drop. Home prices had risen for eight straight months through September.
For all of 2013, prices rose a healthy 11 percent. That was roughly equal to the 11.4 percent price increase for the 12 months that ended in November.
CoreLogic’s price figures aren’t adjusted for seasonal patterns, such as severe winter weather, which typically slows sales.
Still, home sales slowed last fall, even excluding the effects of winter weather. A tight supply of available homes and a jump in mortgage rates during the summer have discouraged many buyers.
In addition, a measure of signed contracts plummeted in December, its seventh straight decline. A one- to two-month lag usually exists between a signed contract and a completed sale.
Higher mortgage rates have disrupted housing’s recovery. Rates rose a full percentage point over the summer as speculation mounted that the Federal Reserve would soon wind down an $85 billion-a-month bond purchase program. The bond buying was intended to spur growth.
The Fed pared its purchases to $75 billion in January, and at the end of the month it said it would reduce them further, to $65 billion, this month. Fed officials said the economy was improving sufficiently to slowly reduce its stimulus.
The average rate on a 30-year mortgage fell to 4.32 percent last week, according to mortgage buyer Freddie Mac. That’s still low by historical standards.
Information for this article was contributed by Martin Crutsinger and Christopher S. Rugaber of The Associated Press.
Business, Pages 25 on 02/05/2014