-Derek Lindsay, BNP Paribas
Demand for big-ticked manufactured goods unexpectedly plunged in December, a sign US businesses are cautious to spend even in light of the strong economic recovery. Durable goods orders fell a seasonally adjusted 3.4% in December from the previous month, against economists' expectations for a 0.6% gain, while core capex, which excludes defence and transportation orders, dropped 0.6% in the reported month. However, broader trends point to a modest increase in demand for durable goods, with orders picking up 6.2% in 2014 compared with a year earlier.
A separate report from Markit offset the negative effect from durable goods orders data, as it showed the US services sector started the year on a slightly firmer footing. The services PMI rose to 54.0 in January, up from the previous month's 53.3, which was the weakest reading in ten month. Activity growth in the sector has slowed since the gauge reached a peak of 61 in June, though January's reading is still higher than 50, the threshold that separates expansion from contraction. Meanwhile, new home sales rose more than expected, as purchases of houses soared 11.6% to an annual rate of 481,000 in December, the highest level in more than six years. The data overshot market expectations for a 450,000 gain and followed a revised 431,000 in the preceding month, the Department of Commerce reported.
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