Economists had predicted a 1.6 percent increase in new orders in the month, based in part on a strong holiday season for retailers.
New orders for goods designed to last at least three years have now dropped three months running and for four of the past five months. In November, orders for manufactured U.S. durable goods dropped 0.1 percent.
Excluding big-ticket transportation items, new business for factories increased 0.5 percent. Excluding defense, new orders fell 2.5 percent.
The drop in orders was pushed by a 12.8 percent drop in transportation orders with the biggest drop in that category commercial aircraft orders, which fell by $5 billion compared with November. Orders for transportation equipment overall dropped 12.8 percent to $39.2 billion.
Inventories among U.S. manufacturers of durable goods rose for the 12th consecutive month, climbing 0.7 percent or $2.1 billion, to $322 billion. Inventories in transportation, again, pushed the overall figure, rising 1.9 percent or $1.6 billion to $86.3 billion.
Shipments of durable goods, up three of the past four months, rose 1.4 percent to $200.4 billion.