U.S. Durable Goods Orders Jump on Aircraft Orders

Increase of 3.3% was largest since January

New orders for manufactured durable goods -- big-ticket items such as planes, cars, refrigerators and computers expected to last a few years -- rose 3.3% to $199.2 billion, after a 1% drop in August, the Commerce Department reported on Oct. 27.

The result, which was the largest increase since January, beat the consensus among analysts of a more modest advance of 1.8%.

Excluding the transportation sector, which can be volatile, durable goods orders fell 0.8% in September after increasing 1.9%t the prior month.

"Order activity is never smooth and recent reports have shown a mixture where the gains exceed losses by a wide margin," said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance/MAPI. "In the first nine months of this year, total durable goods orders are up 15% and nondefense capital goods orders excluding aircraft are 16.6% above the same period one year ago.

"Business equipment spending remains an important source of growth for the economy," he added. "The breadth of the capital equipment rebound amid low utilization rates and sluggish economic growth shows that firms need to repair and replace equipment as production rebounds. In addition, postponed spending for high tech equipment has also come back faster than many in the industry expected. Corporations are very profitable and have the cash to make investments with internal funds.

"Strong export activity, aided by the declining dollar and, when accompanied by modest consumer spending growth, is enough to begin rebalancing the U.S. economy away from its excessive reliance on debt-based consumer spending and housing" Meckstroth concluded.

Copyright Agence France-Presse, 2010

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