Orders for Durable Goods in U.S. Show Sustained Demand: Economy

Orders placed with U.S. factories for durable goods rose in February for a fourth month in the last five, signaling manufacturing will remain a source of strength for the expansion.

Bookings for goods meant to last at least three years advanced 2.2 percent, less than projected, after a revised 3.6 percent decline in January, data from the Commerce Department showed today in Washington. Orders excluding transportation equipment increased 1.6 percent, in line with the median forecast in a Bloomberg News survey of economists.

The report also showed a gain in orders for capital goods that may point to a pickup in corporate spending after a first-quarter slowdown tied to the December expiration of a tax incentive. At the same time, cooler profit growth and slowdowns in Europe and China may keep investment from climbing as fast as earlier in the expansion.

“Business spending will remain a key driver of the U.S. economy, not to the same extent as last year, but still a positive force,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, who accurately forecast the February gain in orders. “No doubt corporate-profit growth will slow this year compared with last.”

Economists projected a 3 percent gain in durable-goods orders, according to the Bloomberg News survey median. Estimates of 83 economists surveyed ranged from a drop of 1.4 percent to an increase of 6.4 percent. Excluding transportation, orders were forecast to increase 1.7 percent.

The Standard & Poor’s 500 Index fell 0.6 percent to 1,403.42 at 11:47 a.m. in New York on declines in oil producers after the government reported a bigger-than-forecast increase in crude supplies.

U.K. Disposable Income

Elsewhere, Britons’ disposable income dropped 1.2 percent last year, the biggest decline since 1977, when the Labour government in power at the time sought to cap income growth in an attempt to bring down inflation. The report from the Office for National Statistics also showed that the U.K. economy shrank 0.3 percent in the fourth quarter.

In the U.S., chief executive officers said they plan to increase capital spending and hiring over the next six months as they turned more optimistic about the economy.

The Business Roundtable’s economic outlook index increased to 96.9 in the first quarter from 77.9 in the previous three months, the Washington-based trade group reported today. Readings greater than 50 are consistent with economic expansion, and this quarter’s measure is the highest since April-June 2011.

Production ‘Tight’

“A lot of our production is tight,” Michael DeWalt, director of investor relations at Peoria, Illinois-based Caterpillar Inc., said at a March 6 industrial conference in New York. “We have very long lead times on some products. For large mining trucks, we’re taking orders now into 2014 the business is so strong.”

Unfilled orders for non-defense capital goods minus aircraft climbed 0.7 percent after a 0.8 percent increase that shows demand may be sustained, today’s report showed.

Recent “better news” on the economy has included a “slight bit of encouraging news here and there in the housing market” as well as strength in manufacturing, Federal Reserve Chairman Ben S. Bernanke this week said in response to audience questions following a speech in Arlington, Virginia.

February orders for U.S. durable goods were boosted by demand for transportation equipment, which climbed 3.9 percent and was led by a 6 percent advance in civilian aircraft orders. Boeing Co., the largest U.S. aircraft maker, said it received 237 orders last month, up from 150 in January.

Auto Demand

Bookings for automobiles and parts increased 1.6 percent, the most since October. Cars last month sold at the fastest pace in four years, led by Chrysler Group LLC and a surprise gain from General Motors Co. Light-vehicle sales accelerated to a 15 million annual rate, the strongest since February 2008, according to data from Ward’s Automotive Group.

Today’s report showed bookings for non-defense capital goods excluding aircraft -- a proxy for business investment in items such as computers, engines and communications gear -- increased 1.2 percent.

Shipments of those goods, used in calculating gross domestic product, increased 1.4 percent in February after falling 3 percent.

Business spending on equipment and software climbed at a 4.8 percent pace in the final three months of 2011 after a 16.2 percent surge in the prior quarter, according to Commerce Department data on GDP. So-called core equipment purchases rose at a 1.1 percent annual rate over the latest three months.

“That strongly suggests the first-quarter growth rate of business investment in equipment and software will be similarly lackluster,” Paul Ashworth, chief U.S. economist for Capital Economics in Toronto, said in a note to clients. “Thankfully, the survey evidence points to a pickup in business investment growth in the second quarter.”

Orders for communications equipment advanced 11.2 percent in February, the most since June 2011, today’s report showed. Bookings for computers and electronic products climbed the most since December 2010.