Demand for a wide range of U.S. manufactured goods unexpectedly fell in January, while new applications for jobless benefits rose again last week, suggesting a step back in the economic recovery.
The U.S. Commerce Department said on Thursday durable goods orders, excluding transportation, slipped 0.6 percent last month after increasing 2.0 percent in December. That was below market expectations for a 1.0 percent rise.
Overall orders, however, jumped 3.0 percent on hefty aircraft bookings, double market expectations and building on the 1.9 percent increase in December.
Separately, the number of people filing for first-time state unemployment insurance rose 22,000 to 496,000 last week, the U.S. Labor Department said. It was the second straight week claims rose and exceeded market expectations for 455,000.
Rising jobless claims and weaker orders suggest the economy is retrenching in the first half of the first quarter. There's no reason to think this is the start of a double dip, some back-and-fill is standard operating procedure in recoveries, said Chris Low, chief economist at FTN Financial in New York.
The weak economic reports combined with threats from rating agencies to downgrade Greece's sovereign debt to push U.S. stocks lower. Prices for U.S. government debt rose, while the dollar neared a nine-month high against the euro.
The data, coming a day after a report showed U.S. new home sales plunged to a record low in January, supported views that the economic growth would slow in the first quarter after a brisk 5.7 percent pace in the October-December period.
The fourth quarter was supported by a swing in inventories. That adds to growth, but it's not something that can be sustained over time, said Andrew Gledhill, economist at Moody's Economy.com in West Chester, Pennsylvania.
First quarter (growth) will be more dependent on how the U.S. consumer is doing and what kind of production levels manufacturing is doing. It's more the underlying economy, less the kind of temporary technical factors.
HARSH WEATHER BLAMED
The government will on Friday publish its second estimate of fourth quarter gross domestic product, which is expected to more or less confirm the strong pace it reported last month.
The economy resumed growth in the second half of 2009 after the worst downturn since the 1930s. However, employment is lagging the recovery and weekly jobless claims have failed to hold retreats made since mid-November.
Economists blamed harsh weather conditions that have affected some parts of the country for the setback in the labor market improvement and remained optimistic the economy would start to create jobs in the first half of the year.
Part of the boost to employment will come from hirings related to the 2010 U.S. census. Since the start of the recession in December 2007, payrolls have dropped every month, except in November last year when employers added 64,000 jobs.
The overall tone of the January durable goods report was negative, with orders for machinery posting their biggest decline in a year.
Motor vehicles and parts orders fell their largest in eight months, and a closely watched gauge of business spending dropped 2.9 percent after a 3.3 percent rise in December.
Shipments, which go into the calculation of gross domestic product, slipped 0.2 percent in January. They rose 2.4 percent in December.
Some analysts, however, drew comfort from gains in some categories, in particular the large orders for computers and electronic products, which they said pointed to increased business investment in equipment and software.
In addition, unfilled orders increased for the first time since September 2008 and inventories did not fall for the first time since December 2008, said Tony Crescenzi, portfolio manager at PIMCO in Newport Beach, California. In this context these data are not as bearish for the economy as the core data suggest.
Durable goods inventories were flat last month after easing 0.2 percent in December. Unfilled orders rose 0.1 percent, snapping a record 15 straight months of decline.
(Additional reporting Doug Palmer;Editing by Padraic Cassidy)