-Jennifer Lee, a senior economist at BMO Capital Markets
Orders for US-manufactured goods declined for a fifth consecutive month in December, marking the longest streak since the Great Recession ended. According to the Commerce Department, new orders for factory goods dropped 3.4%, following the 1.7% decline in November and beating economists' expectations for a 2.2% decrease. However, orders for non-defence capital goods excluding aircraft, considered as a gauge of business confidence and spending plans, fell 0.1% compared with the 0.6% drop in the previous month, adding to signs of a rebound in the coming months. Business spending on equipment in the final quarter of the year was the weakest since mid-2009, holding back the US economy to a 2.6% annual growth rate. Economists estimate that the slowdown will be temporary and the growth will accelerate this year as consumer spending remains strong.
Manufacturing is being undermined by faltering demand in Europe and Asia, as well as a strong US Dollar and plunging crude oil prices, which have forced some companies in the energy sector to either postpone or cut back on capital expenditure projects. However, it is expected that solid domestic consumer spending will be enough to compensate a drag form the global economy. The US economy is seen growing at a rate above 3% for all of 2015, which would be the best annual growth in a decade.
© Dukascopy Bank SA