Joseph Bonney, Senior Editor | Feb 28, 2012 10:31AM EST
Orders for U.S. durable goods fell 4 percent in January, the biggest decline in three years, following the expiration of a tax break on equipment purchases.
Demand for core capital goods, which exclude aerospace and defense orders, fell 4.5 percent after increasing 3.4 percent in December and falling 1.5 percent in November, according to the Census Bureau.
Economists said the January drop in durable-goods orders was influenced by the year-end expiration of a tax credit that allowed full depreciation of equipment purchases. The allowance this year is 50 percent.
December was the best month of U.S. factory growth in five years. Manufacturing has been boosted by strong auto sales and increasing business investment in machinery and other equipment.
“Taking a longer perspective, new orders are up 8.8 percent in January 2012 from January 2011 and nondefense capital goods orders excluding aircraft are up 6.5 percent over the same time period,” said Daniel Meckstroth, chief economist at the Manufacturers Alliance for Productivity and Innovation.
Most economic barometers point to continuing slow growth. “We believe that business equipment investment fundamentals are conducive to growth and that capital equipment spending growth will exceed overall economic growth this year and next,” Meckstroth said.
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