U.S. Durable Goods Orders End Year on Positive Note as Industrial Spending Remains Weak

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Researched by Industrial Info Resources (Sugar Land, Texas)--2012 was a good year for durable goods orders and an uneven one for industrial spending in the U.S. New orders for manufactured durable goods recorded small gains in most months, but remained positive for most of the year. Industrial spending was strong in the first few months, thanks in part to a mild winter, but began to slow as the year progressed. Durable goods orders for December were very solid, while industrial spending continued to decline.

Click on the image at the right for a graph detailing U.S. capital and maintenance spending in December 2012 by industry.

New orders for manufactured durable goods grew 4.6% in December, the seventh out of the last eight months in which orders increased. Gains were seen in key sectors such as primary metals, fabricated metal products, machinery, computers and electronic products, and transportation equipment, while only a single sector--electrical equipment, appliances and components--posted a loss for the month. In the volatile transportation equipment sector, orders increased 56.4% for defense aircraft and parts and 10.1% for nondefense aircraft and parts, while the motor vehicles and parts sector only saw a modest gain of 0.4%.

Shipments of manufactured durable goods continued to increase in December, rising 1.3%, making for gains in five of the last six months. Increases were seen in the primary metals, computers and electronic products and transportation equipment sectors, while the fabricated metal products and machinery sectors posted losses. Unfilled orders for manufactured durable goods continued to increase as well, rising 0.8% and ending the year with solid growth, having increased for six of the last seven months. Inventories took its first loss in 14 months, declining by $100 million, which translates into no gain or loss for the month.

December was one of the slowest months for U.S. industrial spending. While close to 550 capital or maintenance projects began construction activities during the month, their total value was only in the neighborhood of $6.4 billion. The majority of the work took place in three key regions of the country: the Great Lakes, the Northeast and the Southwest. The Great Lakes region saw the most investment for the month, with just less than 160 projects worth an estimated $2 billion begin construction. The Northeast and the Southwest each contributed $1.2 billion to the spending total, with the Southwest seeing 69 projects, the fourth-highest number, begin construction.

The Industrial Manufacturing Industry ended the year as the largest spender in the U.S., with more than 250 capital or maintenance projects worth an estimated $1.5 billion beginning construction in December. The Power Industry, always a major spender, saw the second-highest amount of investment for the month, with 11 projects worth $1.4 billion beginning construction. Only one other industry topped the billion-dollar spending mark in December: the Oil & Gas Production Industry, which saw eight projects worth $1 billion begin construction. The Metals & Minerals Industry contributed $771 million to the spending total with 43 projects, but after that, the spending totals for the balance of the industries were significantly lower, with only three other industries topping $200 million: the Alternative Fuels Industry at $397 million, the Food and Beverage Industry at $287 million, and the Pharmaceutical & Biotech Industry at $478 million.

While the durable goods numbers are certainly good news, 2013 could still see some severe ups and downs. Many companies remain worried about Washington's postponement of the "fiscal cliff" issue until the end of March or April, as well as the temporary debt ceiling limit that has to be addressed again in three months. This does not give companies confidence in the overall economy, nor in the government's ability to fix these key problems. This lack of confidence could lead to weaker-than-normal industrial spending and could cause significant shifts in durable goods orders in the months to come. It may well be the middle of summer before the U.S. sees stability in industrial spending, which has the potential to make 2013 a very tough year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.