BLBG: Orders for U.S. Non-Transport Durable Goods Jump Most in a Year
Orders for U.S. durable goods excluding transportation gear climbed in January by the most in a year, indicating business investment is holding up.
Bookings for equipment meant to last at least three years minus demand for things such as aircraft, which is often volatile, climbed 1.9 percent, exceeding the median forecast of economists surveyed by Bloomberg and the most since December 2011, Commerce Department data showed today in Washington. Total orders dropped more than projected, reflecting the biggest slump in defense bookings in a decade.
Healing overseas markets, sustained demand for automobiles and leaner inventories are combining to stabilize manufacturing beyond the monthly swings in aircraft orders. Further strides in the industry combined with a rebounding housing market would support Federal Reserve Chairman Ben S. Bernanke’s view that the economy will pick up after cooling at the end of 2012.
“Globally, sentiment measures from the factory sector seem to have strengthened,” Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. “In the U.S., we will see continued growth in the equipment sector.”
Total orders slumped 5.2 percent, the first decline since August. The median forecast of 78 economists surveyed by Bloomberg projected a 4.8 percent decrease. Estimates ranged from a decline of 8.3 percent to a gain of 3 percent. Last month’s drop followed a 3.7 percent gain in December that was initially reported as 4.3 percent.
Excluding Transportation
Orders excluding volatile transportation equipment, like commercial and military aircraft, climbed for a fifth consecutive month, representing the longest string of gains since an eight-month stretch through March 2006. They were projected to increase 0.2 percent, according to the Bloomberg survey median.
Capital goods orders excluding defense and aircraft jumped 6.3 percent in January, the most since December 2011, today’s report showed. They are considered a proxy for business investment in items such as computers, engines and communications gear.
Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, decreased 1 percent after being little change in December.
Orders for defense equipment slumped 69.5 percent, the most since July 2000.
Rising Exports
A global economy that is regaining its footing should help support American producers. Goods exports climbed in December to the second-highest level in records back to 1992, Commerce Department figures showed Feb. 8.
Domestic demand from companies and consumers will help as well. Business outlays on equipment and software grew at a 12.4 percent rate in the final three months of 2012, the fastest in more than a year.
“While we’re not forecasting a strong upswing in growth this year, we do think we’re coming off the lows based on what we see in orders so far and what we hear from customers,” Michael Larsen, chief executive officer of Gardner Denver Inc., said during a Feb. 22 earnings call. The Wayne, Pennsylvania- based company makes compressors and pumps.
“We expect demand to remain stable in North America as the economy here appears to be improving modestly,” Larsen said. While Europe is still struggling, “China appears to be improving from the lows of last year. We believe that this moderate growth will improve throughout the year and lead to a stronger second half.”
Automakers
Another bright sport for manufacturing, American automakers are enjoying improved demand. Cars and light trucks sold at a 15.2 million annual rate last month after 15.3 million in December, according to Ward’s Automotive Group. Including November’s 15.5 million rate, car sales in the past three months have been the strongest in five years.
To ensure the expansion maintains traction, Fed policy makers have pursued unprecedented monetary easing. Bernanke yesterday, testifying before the Senate Banking Committee, defended the Fed’s $85 billion a month in asset purchases and near-zero target interest rate, saying that “monetary policy is providing important support to the recovery.”
“Notably, keeping longer-term interest rates low has helped spark recovery in the housing market and led to increased sales and production of automobiles and other durable goods,” he said.
To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
