US durable goods orders fell 3.7% in Jan, vs 2.0% drop expected

New orders for key U.S.-made capital goods fell for a second straight month in January and shipments barely rose, suggesting a slowdown in business spending on equipment after robust growth in 2017.

The Commerce Department said on Tuesday orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.2 percent last month after declining 0.6 percent in December.

That was the first back-to-back drop in these so-called core capital goods orders since May 2016. Economists polled by Reuters had forecast these orders rising 0.5 percent last month. Orders increased 8.0 percent on a year-on-year basis.

Shipments of core capital goods edged up 0.1 percent after an upwardly revised 0.7 percent rise in December. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement. They were previously reported to have increased 0.4 percent in December.

The report added to weak retail sales, industrial production and home sales data in suggesting that economic growth moderated early in the first quarter.

Business spending on equipment increased at its fastest pace in more than three years in the fourth quarter, contributing to the economy’s 2.6 percent annualized growth pace during the final three months of the year.

But spending on equipment is likely to remain supported, with companies expected to use some of their windfall from a $1.5 trillion tax cut package to boost productivity.