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Ahead of the Bell: US Durable Goods

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February 27, 2014 06:20 AM EST | AP

WASHINGTON (AP) — The Commerce Department reports on business orders for long-lasting manufactured goods in January. The report comes out at 8:30 a.m. Eastern Thursday.

ORDERS DROP: Economists forecast that orders for durable goods, items expected to last at least three years, fell 1 percent in January, according to a survey by FactSet. That compares with a 4.2 percent monthly decrease in December.

WINTER TROUBLES: Frigid weather and snowstorms have cut into factory output in recent months. Not only has manufacturing slowed, but the impact has echoed across the economy to dampen hiring, retail and home sales.

Much of December's decline in factory orders came from a 17.5 percent drop in demand for commercial aircraft. Orders for aircraft are extremely volatile month-to-month.

But the demand for basic goods that drive broader economic growth also plunged in December. Orders for iron and steel declined 10 percent, while demand for construction machinery fell 2.9 percent. Orders for computers and other electronic products slid 6.3 percent.

Separate reports indicate that the drop-off continued last month.

Manufacturers made fewer cars and trucks, appliances, furniture and carpeting in January, as cold weather delayed shipments of raw materials and caused some factories to shut down, the Federal Reserve said. Factory production plummeted 0.8 percent last month, ending five straight months of gains.

The Institute for Supply Management, a trade group of purchasing managers, said that its index of manufacturing activity fell to 51.3 in January, from 56.5 in December. It was the lowest reading since May, although any reading above 50 signals growth in manufacturing.

The broad slowdown emerged after the economy had picked up momentum during the final half of 2013.

Retail sales tumbled last month, including a 2.1 percent dip in auto purchases. Sales of existing U.S. homes plummeted in January to the slowest pace in 18 months, according to the National Association of Realtors.

Economists believe that the economy will pivot to stronger growth this year after a halting recovery that followed the recession's end in June 2009. Many analysts are forecasting the economy will grow by around 3 percent in 2014, an increase of more than a percentage point for 2013.

Much of the hope for a better 2014 reflects a belief that the federal government will be less of a drag this year. In 2013, higher taxes and across-the-board spending cuts trimmed about 1.5 percentage points from growth.