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Durable goods orders in U.S. climb 3%, more than forecast

Posted 1/26/12

WASHINGTON - Orders for U.S. durable goods rose more than forecast in December, led by demand for aircraft, autos and business equipment that signals further manufacturing gains.

Bookings for goods meant to last at least three years climbed 3 percent after a revised 4.3 percent gain the prior month that was more than previously estimated, data from the Commerce Department showed Thursday. Economists projected a 2 percent increase, according to the median forecast in a Bloomberg News survey. Demand picked up for machinery, metals and communications equipment.

Gains in consumer and business spending, coupled with lean inventories, may keep driving production in coming months and spur the expansion. Sustained demand from China, Brazil and other emerging economies may also help shield U.S. factories from a slowdown in Europe stemming from its sovereign debt crisis.

“Improving economic momentum and diminished angst surrounding the financial crisis has encouraged businesses to take on more risk,” said Richard DeKaser, deputy chief economist at Parthenon Group Inc. in Boston. “The factory sector will continue to perform well.”

Estimates of 78 economists surveyed by Bloomberg ranged from a drop of 2.8 percent to an increase of 6.7 percent. Durable goods orders climbed 10 percent last year after a 15.5 percent gain in 2010.

Stock Futures

Stock-index futures maintained gains, with the contract on the Standard & Poor’s 500 Index expiring in March climbing 0.5 percent to 1,326.2 at 8:48 a.m. in New York. The yield on the benchmark 10-year Treasury note fell to 1.96 percent from 2 percent late Wednesday.

A separate report showed jobless claims rose last week, displaying the usual volatility around holidays. Applications for unemployment benefits rose by 21,000 to 377,000 in the week ended Jan. 21.

The report showed unfilled orders for durable goods increased 1.5 percent, the biggest rise since March 2008 and a sign production may stay strong in coming months. Unfilled orders for non-defense capital goods minus aircraft rose 0.9 percent for a second month.

Orders for durables excluding transportation equipment increased 2.1 percent after a 0.5 percent rise.

Federal Reserve

Even with the gains, “strains in global financial markets continue to pose significant downside risks to the economic outlook,” Federal Reserve policy makers said yesterday in a statement after keep interest rates near zero.

Thursday's report showed orders for non-defense capital goods excluding aircraft, a proxy for business investment in items such as computers, engines and communications gear, increased 2.9 percent, the most since March, after a 1.2 percent decline.

Bookings rose 6 percent for machinery, the most since March, while communications equipment orders increased 2.2 percent, the biggest gain in three months.

Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, also increased 2.9 percent after falling 1 percent.

Some of the gain in shipments may have reflected companies rushing to qualify for a government tax credit that expired at the end of 2011 that allowed for 100 percent depreciation on equipment purchases. The allowance this year drops to 50 percent.

Commercial Aircraft

Orders for transportation equipment rose 5.5 percent, led by a 19 percent surge in civilian aircraft orders. Boeing Co., the largest U.S. aircraft maker, said it received 287 orders in December, up from 96 in November.

Orders for automobiles and parts increased 0.6 percent in December after no change.

Ford Motor Co., the second-largest U.S. carmaker, posted a 10 percent sales gain last month from a year earlier. In 2011, 2.15 million light vehicles were sold, an 11 percent increase.

“We were able to end the year on, what we feel, is a high note,” Erich Merkle, Ford’s U.S. sales analyst, said on a conference call Jan. 4.

Harley-Davidson Inc., the biggest U.S. motorcycle maker, this week reported a fourth-quarter profit as sales rose 12 percent from a year earlier.

Purchases “were up double-digit despite the challenging but slightly improving economic environment,” John Olin, chief financial officer at the Milwaukee-based company, said on a teleconference. He cited “improved consumer confidence” among reasons for the gain.

U.S. factories, meantime, added 23,000 jobs in December, the most in five months.

Other gauges have shown a stronger pace of manufacturing at the end of last year. The Institute for Supply Management’s factory index rose in December at the fastest rate in six months. Measures of production and new orders increased at the fastest rates since April as inventory indexes fell, pointing to further production gains.

A report from the Fed on Jan. 18 showed factory production in December rose the most in a year as manufacturers churned out more computers, cars and construction material.

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