Factory Sector Ended 2015 With A Giant Thud

The factory sector ended 2015 with a giant thud. Durable goods orders fell 5.1 percent in December vs expectations for a 0.2 percent gain and a low-end estimate of minus 3.0 percent. Aircraft orders didn't help but they weren't the whole cause of the problem as ex-transportation orders fell 1.2 percent vs expectations for no change and a low-end estimate of minus 0.4 percent. Core capital goods, which exclude defense equipment and also aircraft, are especially weak, down 4.3 percent following a 1.1 percent decline in November. Shipments for core capital goods, which are an input into GDP, slipped 0.2 percent following what was another 1.1 percent decline in November. Weak export markets, made weaker for U.S. manufacturers by the strength of the dollar, together with contraction in the energy sector may now be pushing the factory to an accelerated breakdown.

Recent History Of This Indicator:
Pulled down by weak exports and weak demand for energy equipment, the factory sector has been a weak link in the economy. More of the same is expected for December with the Econoday consensus calling for a only 0.2 gain for durable goods orders and no change for ex-transportation orders. Looking back, November orders were especially weak for core capital goods. Another decline here could lower estimates for fourth-quarter GDP.