March 24 (Bloomberg) -- U.S. orders for durable goods rose 0.3 percent in February, the third increase in four months, led by computers and aircraft.

The rise in demand for big-ticket items made to last at least three years followed a decline of 1.1 percent in January, the Commerce Department said today in Washington. Orders excluding transportation fell 0.2 percent, the first drop in three months, after a 0.9 percent increase in January that was larger than the government estimated a month ago.

Orders are still up from a year earlier as companies continue to invest in equipment, software and inventories amid expectations that the economic expansion will continue. The drop in February may be a belated response to the end of tax incentives designed to spur orders in 2004, economists said.

``We were due for a pause,'' said Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. ``These figures are certainly not a cause for concern.''

Initial applications for state unemployment benefits rose to 324,000 last week from 321,000, the Labor Department reported. The less-volatile four-week moving average was 321,750, down 5.4 percent from a year ago.

The median forecast of 73 economists Bloomberg News surveyed before the report called for orders to rise 0.9 percent after a previously reported decline of 1.3 percent for January. Orders excluding transportation were expected to rise 0.3 percent after a previously reported increase of 0.3 percent the previous month.

Dollar Value

Because of revisions in January, the dollar value of orders was close to expectations of $202.2 billion for all durable goods and $147.5 billion for durables excluding transportation.

Bookings for non-defense capital goods excluding aircraft, an indication of future business investment, fell 2.1 percent last month after rising 4.4 percent in January, a bigger increase than previously reported. Shipments of such goods, which the government uses to calculate quarterly gross domestic product, fell 2.6 percent after rising 3.6 percent.

Even with the declines in February, orders for non-defense capital goods excluding aircraft were up 16 percent in the first two months of 2005 compared with a year earlier.

Among capital goods, orders for electrical equipment, appliances and components fell 4.5 percent. Machinery orders fell 1.1 percent after rising 1.5 percent.

Capital Goods

Orders for military aircraft rose 11 percent after a 53 percent increase the prior month. Excluding defense spending, all orders for durable goods rose 0.2 percent, the third increase in four months.

Orders for transportation equipment, a volatile category, rose 1.6 percent after falling 6.3 percent in January. Bookings for commercial aircraft rose 32 percent, after decreasing by the same amount the prior month.

Bookings for motor vehicles and parts fell 1.2 percent after falling 4.5 percent in January.

General Motors Corp., the world's largest automaker, said March 1 that first-quarter production in North America would decline 12 percent from a year earlier after sales in the first two months of this year fell. The Detroit-based company last week forecast its largest quarterly loss since 1992, citing near-record fuel prices and competition from Asian automakers.

Business fixed investment jumped 10.6 percent last year after a 3.3 rise in 2003, previous figures from the Commerce Department show. Such spending may rise 9.9 percent this year, according to economists surveyed this month by Blue Chip Economic Indicators.

Fixed Investment

Chicago-based Boeing Co., the world's second biggest maker of airplanes, behind Europe's Airbus SAS, said March 8 it received orders for 34 aircraft in February, up from 20 the previous month.

Companies are still increasing investments based on expectations of increased demand.

Dow Chemical Co., the biggest U.S. chemical maker, plans to increase its capacity to make polymers by 17,000 metric tons a year at plants in Louisiana and Michigan. A 3,000-ton expansion will be completed in Stade, Germany, by 2006, the Midland, Michigan, company also said this week. The expansions will primarily serve the North American building materials industry, which is growing faster than 6 percent a year, Dow said.

``This decision to expand now is based on continued global demand strength across all major industries, including building materials -- the largest,'' Marty Kollmeyer, Dow global business director for methyl cellulose products, said March 21 in a statement.

Expanding Capacity

Exxon Mobil Corp., the world's biggest oil refiner, based in Irving, Texas, is among companies expanding capacity as worldwide demand pushes gasoline prices to a record. Refinery spending by Exxon Mobil and rivals such as Saudi Aramco and Total SA may add up to at least $11 billion.

Inventories relative to sales, a measure of how long supply can be expected to last at the current level of demand, stayed at a record low 1.3 months in January.

``Despite aggressive stockpiling over the second half of 2004, the inventory-sales ratio has moved essentially sideways for over a year, as demand has been more vigorous than firms anticipated,'' said Stephen Stanley, chief economist at RBS Greenwich Capital, in Greenwich, Connecticut.

The Institute for Supply Management's monthly survey, released earlier this month, showed that that orders grew at a slower pace in February.

``Although new orders for consumer durable goods have slowed, there has been an acceleration in demand for capital goods and exports,'' said Steven Wood, president of Insight Economics LLC in Danville, California.

Higher supply costs are also starting to pinch some manufacturers.

Pittsburgh-based Alcoa Inc., the world's biggest aluminum producer, will cut 2,000 jobs over the next year and sell a stake in Elkem ASA of Norway to reduce operating costs and debt after a surge in the cost of electricity and raw materials led to a drop in fourth-quarter profit.

Last Updated: March 24, 2005 09:26 EST