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In this Monday, Dec. 16, 2013, file photo, driver Kyle Woodroof loads packages in his delivery truck in Kansas City, Mo. (Charlie Riedel/AP)
In this Monday, Dec. 16, 2013, file photo, driver Kyle Woodroof loads packages in his delivery truck in Kansas City, Mo. (Charlie Riedel/AP)

Transportation weighs on U.S. factory orders in December Add to ...

New orders for U.S. factory goods fell in December, but rose for a third straight month when the volatile transportation sector was excluded, which could ease concerns of an abrupt slowdown in manufacturing activity.

The Commerce Department said on Tuesday new orders for manufactured goods dropped 1.5 per cent, the largest fall since July, weighed down by a plunge in bookings for transportation equipment.

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November’s orders were revised to show a 1.5 per cent increase instead of the 1.8 per cent gain previously reported.

Economists polled by Reuters had forecast new orders received by factories falling 1.7 per cent in December.

New orders for transportation equipment tumbled 9.7 per cent, the largest drop since July, after increasing 8.1 per cent in November. Orders for motor vehicles fell by the most in five months. Non-defense aircraft and parts orders fell 17.5 per cent.

Orders excluding transportation gained 0.2 per cent after rising 0.3 per cent in November. There were gains in orders for machinery, electrical equipment, appliances and components. Orders for primary metals fell and bookings for computers and electronic products posted their biggest drop since June 2012.

Factory activity is expected to slow down early this year after output grew at its fastest pace in nearly two years in the fourth quarter. That will also hold back economic growth after brisk expansion in the second half of the year.

The Institute for Supply Management reported on Monday that its index of national factory activity dived to an eight-month low in January, with orders recording their largest drop in more than 30 years.

But manufacturing is not slowing as sharply as suggested by the ISM survey, with bad weather accounting for some of the slowdown. There also has been a steady rise in order backlogs.

Unfilled orders at the nation’s factories rose 0.4 per cent in December to their highest level since the series started in 1992 and were up 0.9 per cent in November.

Economic activity has cooled off a bit in part due to unseasonably cold weather across much of the country and payback after the second half’s robust 3.7 per cent annual growth pace, which was driven by inventories, consumer spending and trade.

The Commerce Department said orders for durable goods, manufactured products expected to last three years or more, dropped 4.2 per cent instead of the 4.3 per cent fall reported last month. Durable goods orders excluding transportation fell 1.3 per cent and not 1.6 per cent as previously reported.

Orders for non-defense capital goods excluding aircraft – seen as a measure of business confidence and spending plans – declined 0.6 per cent instead of the previously reported 1.3 per cent drop.

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