New orders for U.S. manufactured goods fell in January by the most in three years as demand fell across the board from machinery to aircraft, suggesting the economy started the year on weaker footing than expected.
Durable goods orders dropped 4.0 percent, the biggest drop since January 2009 when the country was still mired in a deep recession, according to Commerce Department data on Tuesday.
"What we are seeing is that that the buildup of inventory that made third quarter GDP so strong is beginning to crest. We are seeing a slowdown in domestic demand for equipment and also slower overseas demand," said Christopher Low, chief economist for FTN Financial.
"Also significant is the tax break on capital investment in 2011 is no longer there in 2012," Low said.
Economists had forecast orders falling 1.0 percent.
Durable goods range from toasters to big-ticket items like aircraft which are meant to last three years and more.
Excluding transportation, orders fell 3.2 percent. Economists had expected that reading to be flat. Machinery orders dropped 10.4 percent, the largest decline since January 2009.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for future business investment, fell 4.5 percent, the steepest drop in a year.
A 6.1 percent drop in bookings for transportation equipment - including a 19 percent fall in civilian aircraft orders - dragged on the overall reading for durable goods.
Boeing received 150 orders for aircraft during the month, according to the plane maker's website, down from 287 in December.
Orders for motor vehicles edged up 0.9 percent.
Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, fell 3.1 percent in January, the biggest decline since April 2009.
