Durable-goods orders and business investment climb for eighth month in a row


The numbers: Business orders for durable goods such as tools, new cars and computer chips rose in December for the eighth month in a row, signaling that companies are preparing for a stronger economic rebound later in the year.

The increase in orders last month was below Wall Street expectations, but the drag mainly stemmed from a slump in demand for new airplanes since the onset of the pandemic. Economists surveyed by Dow Jones and The Wall Street Journal had forecast a 0.8% increase.

If transportation is excluded, new orders rose a solid 0.6%. Regular ups and downs in transportation often exaggerate monthly changes in the level of demand.

Read: The U.S. economy likely grew 4.1% at the end of 2020, but GDP seen masking weakness in some sectors

What happened: Orders for new cars and trucks increased 1.4% in the final month of 2020. Auto sales have held up pretty well during the pandemic as car buyers took advantage of ultra-low rates to lock in good deals.

Orders for airplanes were negative again, as they been almost the entire year. Few airlines are ordering new planes with so little travel going on.

Outside of transportation, business orders held steady. They rose for machinery, primary metals and fabricated-metal parts that are used in a wide array of industrial goods.

The only other notable decline was in computers and related products.

A key measure of business investment rose 0.6% last month, exceeding pre-crisis levels for the third month in a row. These are known as core orders and exclude defense and transportation.

See: MarketWatch coronavirus recovery tracker

The big picture:  Manufacturers are not only pumping out plenty of goods, they’ve increased investment in anticipation of strong sales in the months ahead. That’s a good sign for the economy in 2021.

Just don’t expect a quick turnaround. It might take awhile still before vaccinations are widespread, the pandemic fades and the economy kicks into a higher gear.

Read: Consumer confidence rebounds on vaccine hopes and improving economy

Market reaction: The Dow Jones Industrial Average

and S&P 500

were set to open lower in Wednesday trades.

The Federal Reserve finishes a two-day meeting later today, but the central bank is not expected to make big changes in its strategy to help the economy.

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