US orders for machinery and factory goods increased in January as businesses prepped themselves for future growth. This is another positive sign that the economy is recovering. The Commerce Department said companies in the United States increased their orders for goods by 7.2 percent in January from the previous month. This was the largest increase in more than a year.
Economists see investment in capital goods as a sign of business confidence. Tax increases and the automatic spending cuts, also known as sequestration, didn’t deter businesses from ordering. The increases showed that companies continued to raise production even after the holiday season.
The report didn’t include aircraft and defense orders, which could see a large drop as the Defense Department has to cut its budget due to the sequestration. Aircraft orders dropped and it sent total factory orders to fall 2 percent in January.
The Commerce Department revised the December increase in factory orders from the initial report of 1.8 percent to 1.3 percent. Excluding the transportation equipment orders, factory orders went up 1.3 percent in January.
Orders for boats and ships dropped 74.3 percent while defense aircraft orders plunged 63.8 percent. Nondefense aircraft orders also fell 34 percent. The backlog of unfilled orders dropped 0.2 percent after an increase in December of 0.7 percent.
Total factory orders went up 1.2 percent compared to January 2012. It was an indicator of the continuous momentum in the manufacturing industry even if the rate is slow. Continuous growth is needed if manufacturers want to keep production levels steady even if the demand is unsteady.
Analysts are still looking on how consumers will adjust to the higher taxes in the long run. There are some positive signs for the economy, such as the resurgence of the stock market, improving housing market, and the large gains in the job markets. These could lessen the consequences of the smaller paychecks and automatic spending cuts.