U.S. durable goods orders rise 4.6 pct. in December

Bloomberg News
Updated 1/28/2013 8:44 AM
  • An employee works on wiring harnesses at Stern Pinball Inc., the world's only maker of arcade-quality pinball games, in Melrose Park.

    An employee works on wiring harnesses at Stern Pinball Inc., the world's only maker of arcade-quality pinball games, in Melrose Park. Associated Press

Orders for durable goods climbed more than forecast in December, showing U.S. manufacturing rebounded following a mid-year slump.

Bookings for goods meant to last at least three years rose 4.6 percent, exceeding the highest forecast of economists surveyed by Bloomberg, after a 0.7 percent gain in November, a Commerce Department report showed today in Washington. The median forecast of 76 economists surveyed by Bloomberg called for a 2 percent advance. Excluding demand for transportation equipment, which is often volatile, orders increased 1.3 percent, also beating the median projection.

Improving auto sales and a rebound in housing are underpinning the economic expansion, indicating orders will keep coming in for manufacturers from General Electric Co. to DuPont Co. Faster growth in overseas markets and an agreement in Congress to avoid automatic government-spending cuts would help lift business confidence and spur greater investment.

"Economic activity has continued to expand," Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York, said before the report. "We should see further gains in capital expenditure this year."

Estimates in the Bloomberg survey ranged from a decrease of 1.4 percent to a 4.5 percent advance.

Stock-index futures held gains after the figures, with the contract on the Standard & Poor's 500 Index expiring in March rising 0.2 percent to 1,499.1 at 9:04 a.m. in New York.

Excluding transportation, orders were projected to climb 0.8 percent.

Aircraft Bookings

Aircraft bookings, which are often volatile, rose 10.1 percent after falling 12.9 percent in November, today's report showed. Boeing Co., the Chicago-based aerospace company, said it received 183 orders in December, up from 124 the prior month.

Orders for non-defense capital goods excluding aircraft, a proxy for future business investment in items like computers, engines and communications gear, increased 0.2 percent following a 3 percent gain in November that was larger than previously reported. The back-to-back increase of 3 percent in October and November was the largest two-month advance since the end of 2010.

Shipments of those capital goods, used in calculating gross domestic product, increased 0.3 percent after rising 2.2 percent the prior month, also more than previously estimated. Sales climbed for three consecutive months, the longest stretch of gains since mid-2011.

Capital Goods

Orders for non-defense capital goods excluding aircraft have climbed for three straight months just one other time in the past five years, from May through July 2011.

A report on Jan. 30 may show GDP expanded at a 1.1 percent annual pace in the final quarter of 2012, helped by growth in consumer spending, corporate investment and housing, according to the Bloomberg survey median. Capital spending dropped at a 2.6 percent annual rate in the third quarter, the first decline in more than three years.

Automobile purchases remain a source of strength for factories. Cars and light trucks sold at a 15.3 million annual rate in December after 15.5 million the prior month, the best back-to-back showing since early 2008, according to Ward's Automotive Group.

Rising demand for plastics used in autos helped DuPont, the biggest U.S. chemical maker by market value, to report fourth- quarter earnings that exceeded analysts' estimates. The company, based in Wilmington, Delaware, also said sales in 2013 will climb to $36 billion from $34.8 billion.

'Pent-Up Demand'

"The U.S. is experiencing a weak recovery with bright spots and pent-up demand for housing and autos," Chief Executive Officer Ellen Kullman said on a Jan. 22 earnings call.

Manufacturers are also gaining from improving overseas markets led by China, where economic growth accelerated in the fourth quarter for the first time in two years.

General Electric's fourth-quarter profit topped analysts' estimates as demand in emerging markets fueled the aviation and health-care divisions, which helped build a record $210 billion order backlog for the Fairfield, Connecticut-based company.

"We saw real strength in the emerging markets and the developed regions stabilized," Chief Executive Officer Jeffrey Immelt said on a Jan. 18 conference call. GE "entered 2013 with substantial momentum" following "solid order growth in five of the six businesses," he said.

Caterpillar Inc., the world's largest maker of construction and mining equipment, today reported fourth-quarter profit that topped analysts' estimates.

"We're encouraged by recent improvements in economic indicators, but remain cautious," Chief Executive Officer Doug Oberhelman said in a statement.

Businesses still face the risk that lawmakers fail to avert across-the-board government spending cuts scheduled to begin March 1, even after the fiscal pact passed by Congress on Jan. 1 avoided sweeping tax increases that had threatened to crimp consumer spending.

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