Orders for business equipment exceed forecast

  • Bloomberg News
  • Wednesday, November 25, 2015 3:17pm
  • Business

WASHINGTON — Orders for U.S. business equipment climbed more than forecast in October, indicating steady domestic demand is encouraging corporate investment even as global sales waver.

Bookings for non-military capital goods excluding aircraft rose 1.3 percent, the most in three months, after an upwardly revised 0.4 percent increase in September, data from the Commerce Department showed Wednesday. Orders for all durable goods— items meant to last at least three years— climbed 3 percent, almost twice the median estimate in a Bloomberg survey.

Persistent strength in the U.S., thanks in part to a consumer who has benefited from a better job market, may be encouraging companies to spend more on new equipment after years of underinvestment. A pickup in foreign markets would help fatten the order books of American producers, allaying concerns that global growth is faltering.

“The orders suggest there is some momentum as we head into the end of the fourth quarter,” said Jacob Oubina, senior U.S. economist at RBC Capital Markets LLC in New York, whose forecast for business equipment demand was the closest in the Bloomberg survey. “We’ve seen a carving out of the weakness that’s plagued the manufacturing space in recent months.”

The median forecast of 76 economists surveyed by Bloomberg estimated durable goods orders would rise 1.7 percent, with projections ranging from a 0.7 percent drop to a 4 increase.

Orders for non-defense capital goods excluding aircraft— a proxy for business investment— were projected to rise 0.2 percent after a previously reported 0.1 percent drop in September. Demand for primary metals, machines, electronics and communications equipment picked up last month.

Shipments of non-military capital goods excluding aircraft, used to calculate gross domestic product, decreased 0.4 percent in October after rising 0.7 percent the month before. September was revised from a previously reported 0.5 percent gain.

Commercial aircraft orders surged 81 percent in October after dropping 32.2 percent a month earlier. Boeing Co., the Chicago-based aerospace company, said it received 59 orders for planes last month, the most since July.

Excluding transportation equipment demand, which is volatile from month to month, bookings increased 0.5 percent in October, the report showed. Demand for non-defense goods jumped 3.2 percent after falling 1.6 percent.

Factories in October made further progress in reducing inventory, the report showed. Durable goods stockpiles declined 0.2 percent after a 0.6 percent decrease a month earlier.

Capital expenditures had been restrained by weakness in the energy sector as exploration and production companies pare investment on the heels of a slide in oil prices. Slower global growth, led by a slowdown in China, is also making reconsider more investment in new equipment.

Companies seem satisfied meeting demand through increased hiring. Payrolls last month climbed by 271,000— the most all year— while the unemployment rate reached the lowest level since April 2008.

The tighter labor market has led to emerging wage pressures that may make capital investment seem more attractive. Average hourly earnings climbed by 2.5 percent in October, the most since July 2009, according to Labor Department data.

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