You are here
Orders for business equipment in US rise more than forecast
[WASHINGTON] Orders for US 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 per cent, the most in three months, after an upwardly revised 0.4 per cent 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 per cent, almost twice the median estimate in a Bloomberg survey.
Persistent strength in the US, 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 fact that consumer spending domestically has been as strong as it has been provides some confidence to businesses," Millan Mulraine, deputy head of US research and strategy at TD Securities USA LLC in New York, said before the report. As a result, "we're likely to see a pickup not only in capital investment but also in hiring." The median forecast of 76 economists surveyed by Bloomberg estimated durable goods orders would rise 1.7 per cent, with projections ranging from a 0.7 per cent drop to a 4 increase.
Orders for non-defense capital goods excluding aircraft - a proxy for business investment - were projected to rise 0.2 per cent after a previously reported 0.1 per cent 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 per cent in October after rising 0.7 per cent the month before. September was revised from a previously reported 0.5 per cent gain.
Commercial aircraft orders surged 81 per cent in October after dropping 32.2 per cent a month earlier.
Boeing Co, the Chicago-based aerospace company, said it received 59 orders for planes last month, the most since July. Industry data doesn't always correlate with the government statistics on a month-to-month basis.
Excluding transportation equipment demand, which is volatile from month to month, bookings increased 0.5 per cent in October, the report showed. Demand for non-defence goods jumped 3.2 per cent after falling 1.6 per cent.
Factories in October made further progress in reducing inventory, the report showed. Durable goods stockpiles declined 0.2 per cent after a 0.6 per cent 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 some 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 labour market has led to emerging wage pressures that may make capital investment seem more attractive. Average hourly earnings climbed by 2.5 per cent in October, the most since July 2009, according to Labour Department data.