By Amara Omeokwe and David Harrison 
 

WASHINGTON--Demand for long-lasting factory goods rose in December, the Commerce Department reported Tuesday. The increase was driven by a sharp rise in defense spending during a month when Congress passed funding bills that included a boost in military spending, and the report broadly was the latest sign the U.S. manufacturing industry remains on uneven footing.

Orders for durable goods-products designed to last at least three years-rose 2.4% in December from the previous month. Economists surveyed by The Wall Street Journal expected a 0.3% decrease.

Demand for military equipment surged after a steep decline in November, with orders for defense capital goods up 90.2% on the month.

New orders for transportation equipment were up 7.6%, boosted by a 168% jump in orders for defense aircraft. Meanwhile, orders for nondefense aircraft fell sharply, likely reflecting the continued fallout from the grounding of Boeing's 737 MAX plane. Excluding transportation, a category that can be volatile, orders were down 0.1%. Excluding defense, orders fell even further in December, by 2.5%.

Orders in November were down 3.1%, a bigger decline than previously estimated.

New orders for nondefense capital goods excluding aircraft-or so-called core capital goods orders, a closely watched proxy for business investment-decreased 0.9% in December from the previous month, to $68.6 billion. New orders overall decreased 1.5% for all of 2019 compared to 2018, with core orders up 0.8% on the year.

Another reading on U.S. business investment, along with a broad measure of the country's economic output, will come Thursday when the Commerce Department releases its first estimates of gross domestic product for 2019's fourth quarter and full year.

The rise in durable goods orders last month came amid developments that could bode well for U.S. manufacturing. In addition to Congress' passage of its spending package, U.S. and China officials agreed to the first phase of a trade deal, which was signed into effect on Jan. 15. The deal marked an easing in a trade dispute between the two countries that weighed on the global manufacturing industry for much of 2019.

Still, recent data have painted a mixed picture of the U.S. manufacturing industry. The Federal Reserve reported earlier this month that factory output increased 0.2% in December from November, but a recent survey of purchasing managers from data firm IHS Markit indicated manufacturing activity has slowed during January compared to December.

(END) Dow Jones Newswires

January 28, 2020 08:45 ET (13:45 GMT)

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