New orders for factory goods dropped in January by the most in over a year and businesses cut orders for new capital goods, suggesting one of the drivers of the economic recovery faltered at the start of the year.

The Commerce Department said on Monday orders for manufactured goods fell 1.0 percent, a less steep decline than the 1.5 percent loss expected by private forecasters in a Reuters poll. Still, it was the biggest decline since October 2010.

Many economists think the expiration of some tax breaks on capital spending at the end of 2011 led businesses to bring forward investments.

Indeed, December's gain was revised up to 1.4 percent from a previously reported 1.1 percent.

Orders for non-defense capital goods excluding aircraft - a closely watched category because it is taken as a sign of businesses' future spending plans - fell 3.9 percent in January.

Shipments for this category declined 3.0 percent.

Business spending and manufacturing have been drivers of the recovery since the 2007-2009 recession.

(Reporting by Jason Lange; Editing by Andrea Ricci)

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