U.S. Factory Orders Rose 1.3% in February on Capital Goods

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Photographer: Ty Wright/Bloomberg

Boxed industrial and commercial dryers sit in the shipping area at Staber Industries Inc. in Groveport, Ohio.

Orders to U.S. factories climbed in February for the third month in the last four, boosted by demand for business equipment.

Bookings rose 1.3 percent after a revised 1.1 percent decline in January, figures from the Commerce Department showed today in Washington. The median of 60 economists’ projections in a Bloomberg News survey called for a 1.5 percent advance. Orders excluding transportation equipment increased by the most in five months.

Demand for new vehicles and business investment are sustaining production gains at American factories, which account for about 12 percent of the world’s largest economy. At the same time, slower growth in Europe and China show that sales overseas remain a risk.

“The manufacturing sector is the rock on which the recovery is being built and the base is as stable as it gets,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said before the report. “The economy has leaned on the manufacturing sector for much of the growth during the entire recovery. There appears to be no reason to believe that will change anytime soon.”

Economists’ estimates in the Bloomberg survey ranged from gains of 0.5 percent to 2.6 percent. The Commerce Department revised the January decline from a previously estimated 1 percent decrease.

Stocks were little changed after the figures. The Standard & Poor’s 500 Index dropped less than 0.1 percent to 1,418.11 at 10:08 a.m. in New York.

Minus Transportation

Factory orders minus transportation equipment increased 0.9 percent in February after a 0.5 percent drop.

Bookings for goods meant to least at least three years rose 2.4 percent in February, more than the 2.2 percent advance the government estimated in a March 28 report.

Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, climbed 1.7 percent after dropping 3.4 percent in January.

Shipments of such equipment, which are used in calculating gross domestic product, increased 1.4 percent after a 2.8 percent decline in January.

Bookings for non-durable goods, including petroleum, climbed 0.4 percent, today’s report showed.

Factory inventories rose 0.4 percent in February, and manufacturers had enough goods on hand to last 1.33 months at the current sales pace, the same as in January.

Unfilled Orders

A 1.3 percent increase in unfilled orders in February was almost twice the gain in the previous month and points to a pickup in production.

Improving demand for autos is underscoring the strength in manufacturing. Cars and light trucks sold at a 14.6 million annual rate last month after a 15 million pace in February that was the fastest since February 2008, according to industry data.

“As the economy continues to strengthen, more of the pent- up demand will be released,” Don Johnson, U.S. sales chief for General Motors Co., said yesterday on Bloomberg Television’s “In The Loop With Betty Liu.”

Chrysler Group LLC said today its U.S. sales climbed 34 percent in March from the same month last year, while purchases at Ford Motor Co. increased 5 percent.

Orders for motor vehicles and parts increased 0.2 percent in February after a 1 percent drop, today’s report showed.

Industry in March

Another report showed that the industry strengthened further in March. The Institute for Supply Management’s factory index rose to 53.4 from 52.4 in February, the Tempe, Arizona-based group said yesterday. Readings above 50 signal growth.

Federal Reserve Chairman Ben S. Bernanke said last week that while he was encouraged by recent data showing an improved economy, a further reduction in the jobless rate will probably require a quicker expansion of business production and consumer demand, which “can be supported by continued accommodative policies.”

Recent “better news” on the U.S. economy has also included strength in manufacturing, Bernanke said. The improvement could contribute to higher consumer confidence and lead to a self- sustaining recovery, he said. “We haven’t seen that in a persuasive way yet,” Bernanke said in a speech in Arlington, Virginia.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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