Unexpected Stagnation! US January Durable Goods Orders MoM Initial Reading 0%, Below Market Expectation of 1.1%

U.S. durable goods orders pause, manufacturing recovery faces setbacks. January durable goods orders rose by 0% month-over-month, well below expectations, indicating that the manufacturing rebound remains fragile after a decline the previous month.

On March 13, the U.S. Commerce Department reported that January preliminary durable goods orders increased by 0% MoM, significantly below the market forecast of 1.1%. After a 1.4% MoM decline in December, expectations of a mild rebound were dashed by the zero-growth figure.

A key indicator of business capital expenditure—non-defense capital goods orders excluding aircraft—also grew by 0.0% MoM in January, well below the expected 0.5% and down from December’s 0.6%, reinforcing market caution about corporate investment prospects.

Looking at the components, transportation equipment was the main drag. Orders for transportation equipment fell by 0.9% (down $1 billion) to $113.3 billion in January, marking the third decline in four months.

In contrast, core durable goods orders excluding transportation grew by 0.4% MoM, showing moderate expansion but falling short of the 0.5% forecast and below December’s revised 1.3% increase, indicating weakening momentum in other manufacturing sectors.

Shipments and unfilled orders still provide support

While demand weakened, shipments and unfilled orders showed resilience, offering short-term support for manufacturing activity.

Shipments continued to grow but at a slower pace. January shipments of manufactured durable goods increased by 0.6% MoM to $314.2 billion, the fourth increase in five months, but the growth rate slowed from 1.2%. Transportation equipment shipments rose by 1.0% MoM to $103.5 billion, the third increase in four months.

Unfilled orders continued to accumulate. January durable goods unfilled orders rose by 0.8% MoM to $1.5402 trillion, the 18th increase in 19 months, maintaining strong growth momentum. Transportation equipment unfilled orders increased by 1.0% MoM to $971.1 billion, the tenth increase in eleven months. The ongoing rise in unfilled orders suggests that even as new order momentum slows, production activity has some room to digest backlog in the short term, providing a bottom support for manufacturing.

Rising inventories and potential de-stocking pressures

January inventories of manufactured durable goods increased by 0.2% MoM to $594.7 billion, marking the fourth consecutive month of growth with the same rate as the previous month. Transportation equipment inventories also rose by 0.2% MoM to $188.1 billion, continuing a four-month upward trend.

It is noteworthy that, amid demand-side stagnation in new orders, the continued accumulation of inventories could increase future de-stocking pressures, potentially constraining production in the coming months.