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Orders to U.S. Factories Unchanged as Non-Durables Decrease

Orders to U.S. factories were little changed in November, depressed by a drop in non-durable goods, masking gains for capital equipment that point to a pickup in business investment in 2013.

Bookings, which include durable and non-durable goods, totaled $477.6 billion in November compared with $477.4 billion the prior month, figures from the Commerce Department showed today in Washington. Demand for non-defense capital equipment excluding aircraft, a proxy for future spending, climbed 2.6 percent after rising 3 percent in October.

Sustained gains in employment offer additional evidence that companies are willing to invest and expand as global growth stabilizes and American consumers keep spending on goods such as automobiles even as lawmakers battled over the budget in late 2012. Further pickup in production may depend on a stronger rebound in the global economy and a boost in exports.

“It is surprising that orders were as solid as they were in November,” Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut, said before the report. “In general in 2013, we do have the economy beginning to recover a bit more and growth picking up.”

The median estimate of 55 economists surveyed by Bloomberg projected a 0.4 percent advance in factory bookings. Estimates ranged from a drop of 0.7 percent to a gain of 1.3 percent. The gain in October was unrevised at 0.8 percent.

Payrolls Rise

Another report today showed payrolls rose by 155,000 workers in December following a 161,000 advance the prior month, according to the Labor Department. The increase was in line with the median estimate of economists surveyed by Bloomberg. The unemployment rate held at 7.8 percent after the November figure was revised up from a previously reported 7.7 percent.

Factory employment climbed by 25,000 workers, the biggest gain since March, the report also showed.

Factory orders excluding the volatile transportation category increased 0.2 percent in November after rising 1 percent the previous month, according to today’s Commerce Department report.

Demand for non-durable goods, which is often influenced by swings in prices, decreased 0.6 percent, led by a 2.9 percent drop for petroleum and coal products. Booking for durable goods rose 0.8 percent.

Today’s estimate of orders for capital goods excluding aircraft and military equipment, and including items such as computers, engines and communications gear, was little changed from the 2.7 percent increase the Commerce Department estimated in its Dec. 21 durable goods report.

Business Investment

Shipments of those goods, used in calculating gross domestic product, rose 2 percent, the biggest gain in almost a year. The reading was up from the previously projected 1.8 percent advance the Commerce Department previously estimated.

Factory inventories were little changed in November for a second month, today’s report showed. Shipments climbed 0.4 percent, pushing the inventory-to-sales ratio down to 1.27 months from 1.28 months in October.

The automobile industry remains a source of strength for the U.S., sustaining a boost from sales in the wake of superstorm Sandy as consumers began replacing damaged or destroyed vehicles. Light vehicle sold at a 15.3 million annual rate in December, capping a third-straight annual gain of at least 10 percent which is the first such industry streak since 1973.

“It sure feels a lot better to be selling cars today than a few years ago,” Geoffrey Pohanka, president of the Pohanka Automotive Group, said in a telephone interview. “The age of the fleet and the attractiveness of a lot of cars that are being designed now are going to help sustain sales going forward.”

Auto Sales

That confidence in continued demand has his Washington, D.C.-area dealer group expanding only a few years after retrenchment. Pohanka closed three Saturn stores and a Chrysler- Dodge outlet as part of the 2009 restructurings of the predecessors to General Motors Co. (GM) and Chrysler Group LLC. In 2013, he plans to build a second Honda store in as many years and also will add a new Volkswagen dealership.

Another report this week signaled manufacturing sustained gains at the end of 2012. The Institute for Supply Management’s factory gauge rose to 50.7 last month from November’s 49.5, which was the weakest since July 2009. Fifty marks the dividing line between expansion and contraction.

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

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

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