U.S. factory orders drop 2.0% amid sharp pullback in transportation demand

With orders for transportation equipment showing a substantial pullback, the Commerce Department released a report on Wednesday showing a notable drop in new orders for U.S. manufactured goods in the month of January.

The Commerce Department said factory orders fell by 2.0 percent in January following a revised 1.3 percent increase in December. Economists had expected orders to drop by about 2.2 percent compared to the 1.8 percent increase that had been reported for the previous month.

The drop by factory orders in January was largely due to a 19.8 percent decrease in orders for transportation equipment, which followed a 9.9 percent increase in December.

Excluding orders for transportation equipment, factory orders rose by 1.3 percent in January compared to a 0.1 percent drop in December.

The drop in orders for transportation equipment contributed to a 4.9 percent decrease in orders for durable goods, which was revised from the 5.2 percent decrease reported last week.

On the other hand, orders for non-durable goods increased by 0.6 percent in January after falling by 0.6 percent in December.

The report also showed that shipments of manufactured goods fell for the second consecutive month, dipping by 0.2 percent in January after edging down by less than a tenth of a percent in December.

A 1.2 percent decrease in shipments of durable goods was partly offset by a 0.6 percent increase in shipments of non-durable goods.

Additionally, the Commerce Department said inventories of manufactured goods rose by 0.5 percent in January after inching up by less than a tenth of a percent in the previous month.

With inventories rising and shipments falling, the inventories-to-shipments ratio crept up 1.28 in January from 1.27 in December.