By Lucia Mutikani

WASHINGTON (Reuters) - Orders for long-lasting U.S. manufactured goods fell by the most in nearly four years in January, while business investment on equipment appeared to have eased, signs that the economy lost momentum at the start of the year.

Concerns about the economy's outlook, especially the labor market, and the upcoming presidential election were uppermost in consumers' minds in February resulting in confidence retreating after three straight monthly increases. The decline in confidence reported by the Conference Board on Tuesday was despite inflation expectations over the next 12 months falling to the lowest level in almost four years.

The reports joined a stream of weak data, including retail sales, housing starts and manufacturing production. Some of the softness has been blamed on freezing temperatures last month as well as difficulties adjusting the data for seasonal fluctuations at the start of the year. Nonetheless, economists are not forecasting a recession this year.

"Business capex lays the seeds for future economic growth as the expenditures enable companies to invest more to meet the demand for their goods and services down the road," said Christopher Rupkey, chief economist at FWDBONDS in New York. "While economists have taken down their recession warnings, business leaders with boots on the ground are less certain of the economy in the future."

Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, plunged 6.1% last month amid a sharp drop in commercial aircraft bookings, the Commerce Department's Census Bureau said. That was the largest decline since April 2020, when the economy was reeling from the first wave of COVID-19 infections.

Data for December was revised lower to show orders falling 0.3% instead of being unchanged as previously reported.

Economists polled by Reuters had forecast durable goods orders tumbling 4.5%. Orders fell 0.8% year-on-year in January.

Civilian aircraft orders plummeted 58.9% last month after rising 1.0% in December. Boeing reported on its website that it had received only three orders for commercial aircraft in January, sharply down from 371 in December.

The planemaker is under pressure after a cabin panel blew out on an Alaska Airlines jet mid-air in early January. The Federal Aviation Administration last month barred Boeing from expanding production of its best-selling 737 MAX narrowbody planes to improve quality control.

Overall transportation orders dropped 16.2% last month after slipping 0.6% in December. Orders for motor vehicles and parts fell 0.4%. Excluding transportation, durable goods orders fell 0.3% last month after dipping 0.1% in December.

There were decreases in orders of primary and fabricated metals. Machinery orders were unchanged. But orders for computers and electronic products increased 1.4%, while those for electrical equipment, appliances and components rose 0.9%.

Though there are signs that manufacturing, which accounts for 10.3% of the U.S. economy, is stabilizing after production eased in 2023 amid 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022, a full recovery is still a long way away. While the U.S. central bank is expected to start cutting interest rates this year, policymakers have indicated that they are in no rush to lower borrowing costs.

Stocks on Wall Street were trading lower. The dollar was little changed against a basket of currencies. U.S. Treasury yields rose.

CONSUMER CONFIDENCE EBBS

Nondefense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, edged up 0.1% in January after a revised 0.6% decline in the prior month.

These so-called core capital goods orders were previously reported to have gained 0.2% in December. Core capital goods shipments rose 0.8% after nudging up 0.1% in December.

Nondefense capital goods orders plummeted 19.4%, while shipments fell 3.0%, the largest decline since November 2020, after dropping 1.0% in December. Shipments of these goods go into the calculation of the business spending on equipment component in the gross domestic product report.

"This points to a much weaker start for business equipment spending in the first quarter following a modest gain in the prior quarter," said Priscilla Thiagamoorthy, a senior economist at BMO Capital Markets in Toronto.

Business spending on equipment rebounded modestly in the fourth quarter after contracting in the July-September period. The economy grew at a 3.3% annualized rate last quarter after expanding at a 4.9% pace in the third quarter.

Though the labor market has remained resilient in the face of higher borrowing costs, consumers' assessment of the jobs market is becoming less rosy and eroding confidence in the economy.

A second report from the Conference Board showed its consumer confidence index slipped to 106.7 this month from a downwardly revised 110.9 in January.

Economists had forecast the index little changed at 115.0 from the previously reported 114.8.

The Conference Board said write-in responses showed that while consumers remained preoccupied with inflation, "they are now a bit less concerned about food and gas prices," noting "they are more concerned about the labor market situation and the U.S. political environment."

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, narrowed to 27.8 from 31.7 in January. This measure correlates to the unemployment rate in the Labor Department's closely followed employment report.

Consumers' labor market perceptions could have been colored by a recent wave of high-profile layoffs.

Overall, the labor market remains fairly tight, with first-time weekly applications for unemployment benefits at historically low levels. Labor market strength and still-elevated inflation have led financial markets to push back their expectations of a rate cut to June from May.

Even as consumers' views of the labor market have softened somewhat, many still expect to buy a motor vehicle over the next six months as well as other big-ticket items like clothes dryers and refrigerators. Consumers expected price pressures to ease over the next 12 months, with inflation expectations falling to 5.2%, the lowest level since March 2020, from 5.3% in January.

The share planning to buy a house was the smallest since November 2020 as higher prices and mortgage rates squeeze out aspiring homeowners.

A third report from the Federal Housing Finance Agency showed house prices rose 0.1% in December after increasing 0.4% in November. They advanced 6.6% year-on-year after climbing 6.7% in November. The moderation in house price growth is welcome, especially from the perspective of rental inflation, the major driver of overall inflation.

"The pace of home-price appreciation is consistent with a deceleration in owner's equivalent rent inflation this year," said Michael Pearce, deputy chief U.S. economist at Oxford Economics in New York.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)