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US Capital Goods Orders Rose More Than Forecast in December

More demand for capital goods is a sign that businesses might be following up buoyant post-election sentiment by spending more after years of tepid global growth.

Orders for U.S. capital goods advanced more than forecast in December, showing businesses were adjusting investment plans amid prospects for stronger economic growth.

Bookings for non-military equipment excluding planes climbed 0.8% after increasing an upwardly revised 1.5% in November, data from the Commerce Department showed Friday. Orders for all durable goods -- items meant to last at least three years -- unexpectedly fell 0.4% due to a slump in the volatile military aircraft category.

More demand for capital goods, including machinery, electrical gear and communications equipment, is a sign that businesses might be following up buoyant post-election sentiment by spending more after years of tepid global growth and an energy-price slump. Further gains in investment that could contribute more to economic growth might depend on how quickly the Trump administration and Congress ease regulations and revamp corporate tax policy.

“Capex has been disappointing in recent years, and a second consecutive positive report would suggest that we have finally reached a floor and may start to see greater investment,” Bank of America Merrill Lynch economists, including Ethan Harris, head of global economics research, said in a note to clients before the report.

The median forecast of economists surveyed by Bloomberg projected a 0.2% increase in orders for non-defense capital goods orders excluding aircraft.

Shipments of such capital equipment, which are used in calculating gross domestic product, climbed 1% in December, the most since July 2015. They were up 0.6% the prior month, revised from a 0.2% gain.

In a separate report from the Commerce Department Friday, fourth-quarter GDP rose an annualized 1.9%, according to the government’s first estimate. Spending on equipment climbed at a 3.1% rate, the first increase since the third quarter of 2015.

A 42.4% December surge in commercial aircraft bookings helped ease the sting of a 63.9% plunge in orders for military aircraft, the durables data showed. Orders for non-defense goods increased 1.7%.

Boeing Co., the Chicago-based aerospace company, said it received 290 orders in January, the most since July 2014 and up from 13 orders in November.

Excluding transportation equipment demand, which is volatile from month to month, bookings increased 0.5% in December after a 1% gain the prior month, the durable goods report showed.

Durable goods inventories were little changed after a 0.2% increase in November. Unfilled orders for non-defense capital goods excluding aircraft rose 0.5% for a second month.

By Michelle Jamrisko

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