Orders for U.S. durable goods excluding the volatile transportation category unexpectedly climbed in January by the most in eight months, a sign manufacturing is emerging from a slump induced by harsh weather.
The 1.1 percent increase was the biggest gain since May and followed a 1.9 percent drop in December that was larger than previously estimated, according to Commerce Department data issued today in Washington. Other reports showed more Americans than expected filed claims for jobless benefits last week, and consumer confidence improved to a two-month high.
Companies are regaining confidence growth will rebound as temperatures warm, leading to gains in investment and production that will further strengthen the expansion. The next step would be a rebound in hiring and a corresponding boost to consumer spending, which accounts for almost 70 percent of the economy.
“As the year progresses, we should see business investment along with hiring start to ramp up,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, and the best forecaster of jobless claims for the past two years, according to data compiled by Bloomberg. “There’s some pent-up demand.”
Stocks rose, sending the Standard & Poor’s 500 Index to a record, as Federal Reserve Chair Janet Yellen said the central bank may change its strategy for reducing asset purchases should the economy weaken. The S&P 500 increased 0.5 percent to 1,854.29 at the close in New York.
Today’s durable goods report showed total orders declined a smaller-than-estimated 1 percent, held back by a 20.2 percent drop in demand for commercial aircraft that can be volatile month to month. Chicago-based Boeing Co. (BA) said this month it received 38 aircraft orders in January, down from 319 in December.
The median forecast of 58 economists surveyed by Bloomberg projected orders excluding transportation equipment would fall 0.3 percent. Estimates ranged from a 1.5 percent drop to a 1 percent advance. The December reading was revised down from a previously reported 1.6 percent decrease.
Bookings for non-military capital goods excluding aircraft, a proxy for future business investment, rose 1.7 percent last month after decreasing 1.8 percent in December.
Shipments of those goods, a measure used to calculate gross domestic product, fell 0.8 percent in January after rising 0.3 percent the prior month, starting the first quarter on a weak note. Harsh weather may have prevented factories from making deliveries.
“It’s probably mildly positive but quite mixed,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, who accurately forecast the drop in orders. “The business sector is still very cautious.”
Another report today showed more Americans than forecast filed applications for unemployment benefits last week, a sign the labor market is improving in fits and starts.
Jobless claims increased by 14,000 to 348,000 in the week ended Feb. 22 from 334,000 in the prior period, a Labor Department report showed. The median forecast of 53 economists surveyed by Bloomberg projected 335,000. A Labor Department spokesman said no states were estimated and there was nothing unusual in the data.
“We still have a fairly constructive view on the labor market,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, whose claims forecast of 345,000 matched the highest estimate in a Bloomberg survey. “There have been some weather-related setbacks in hiring, but as it warms up, you’re going to see much better performance in labor-market activity.”
Consumer sentiment improved for a third straight week as Americans were more upbeat about the economy than at any time in the past six months, the Bloomberg Consumer Comfort Index (COMFCOMF) showed today. The gauge climbed to a seven-week high of minus 28.6 in the period ended Feb. 23 from minus 30.6. All three of its components -- views on the economy, household finances and the buying climate -- improved.
“Greater job stability has resulted in a more solid financial footing for U.S. households and has bolstered consumer comfort,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
Today’s durables data offer economists a final opportunity to revise fourth-quarter growth forecasts before a Commerce Department report tomorrow.
The world’s largest economy advanced at a 2.5 percent annualized rate at the end of last year following a 4.1 percent gain in the previous three months, according to the median forecast of economists surveyed by Bloomberg.
The rebound in housing is among reasons demand for expensive items such as appliances, fixtures and flooring is growing at Lowe’s Cos. The home-improvement retailer based in Mooresville, North Carolina, reported a 6.3 percent rise in profit in the fourth quarter.
Customers also are spending on seasonal equipment such as snow blowers, Chief Customer Officer Gregory Bridgeford said.
“We know that winter weather can be unpredictable, so we are ready to respond quickly to the demand for items needed to cope with the January storms,” Bridgeford said on a Feb. 26 earnings call. “Customers needed snow blowers, space heaters, heating fuel, snow shovels and ice melt, as well as pipefitting to replace those that burst from the extreme cold.”
To contact the reporter on this story: Lorraine Woellert in Washington at firstname.lastname@example.org