Weakening goods orders depress US growth hopes

Analysts had pencilled in 0.5 per cent growth, but instead the department reported a 3.4 per cent decline

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The Independent Online

The US Commerce Department dampened hopes of a full-speed recovery in the world’s largest economy yesterday, with a disappointingly weak set of durable goods numbers for December.

Analysts had pencilled in 0.5 per cent growth, but instead the department reported a 3.4 per cent decline. November’s number was also revised from a fall of 0.9 per cent to a 2.1 per cent decline, meaning the index has dropped in four out of the past five months.

Durable goods, which are expected to have a working life of more than three years, are a key indicator of underlying economic growth. US orders, which include anything from heavy industrial capital goods to washing machines and food processors, declined on the back of a strong US dollar. Slackening demand from Europe and some emerging markets weighed on orders.

Economists had been buoyed by recent bullish consumer confidence numbers and a US economy that has weathered the global storm better than most. However, yesterday’s disappointing orders number will lead to lower forecasts.

GDP data to be released this week will show whether consumer spending kept the economy growing rapidly in the final quarter of 2014, following the 5 per cent annualised rate in the third quarter. Analysts are expecting a 3 per cent annualised growth figure on Friday.

Markets and the dollar fell sharply in early New York trade, where the snowstorm Juno also failed to live up to expectations and give traders a snow day.

With the corporate results season in full swing, Caterpillar and Procter & Gamble blamed worsening macroeconomic factors for poor results. The industrial equipment maker Caterpillar posted a grim outlook along with worse-than-expected fourth-quarter results. The company blamed weak international demand for its ubiquitous yellow machinery for a drop in revenue, earnings and profit. Caterpillar is considered a bellwether stock for industrial activity.

Likewise Procter & Gamble, the world’s largest maker of consumer goods such as soap, nappies and toothpaste, blamed the strong US dollar and global currency fluctuations for its worse-than-expected numbers. The company had already warned investors about the impact of currency devaluations in Turkey, Argentina and Bolivia, but analysts were still overly optimistic.

The lowlight of its pre-market announcement was a 31 per cent fall in year-on-year second-quarter net income.