Orders for capital equipment in the U.S. recovered in November

Orders for capital equipment in the U.S. recovered in November, indicating a slowdown in business investment may be less pronounced than some economists projected.

Bookings for goods like computers and communications equipment rose 2.6 percent after declining 3.6 percent in October, which was lower than estimated, the Commerce Department figures showed today in Washington. Total orders fell 1.3 percent, pressured by the ongoing demand for airplanes, and reserves excluding transportation equipment rose more than expected.

Capital spending has been a source of strength for the world's largest economy, while household purchases are starting to accelerate. Manufacturing industry helped pull the U.S. the worst recession since the 1930's, has remained strong throughout the recovery, driven in part by foreign demand for American-made goods.

"There are still some teams spending going on," said Brian Bethune, chief U.S. financial economist IHS Global Insight in Lexington, Massachusetts. "It will be a positive factor for growth."

Another Commerce Department report today showed consumer spending rose in November as incomes rose. Household purchases by 0.4 percent after rising 0.7 percent in October, which was higher than previously estimated. Revenue rose 0.3 percent and the preferred price measure of the Federal Reserve showed that inflation remained below the comfort zone of policy makers.

Jobless Claims

Initial claims for unemployment fell in 3000 to 420,000 in the week ended Dec. 18, the Labor Department figures showed today in Washington. And collecting those benefits fell last week to 4.06 million.

The index futures fluctuated after the reports. The contract on the Standard & Poor's 500 Index expiring in March fell 0.2 percent to 1252.50 at 8:57 in New York. Treasury securities were lower, pushing the yield on the benchmark 10-year to 3.36 percent from 3.35 percent late yesterday.

The median forecast calling for a decline in total orders for durable goods reflects 74 projections in a survey. Estimates ranged from a decline of 3.6 percent to an increase of 3 percent.

Reservations for commercial aircraft fell 53 percent last month after a 7.1 percent decline in October.

Excluding transportation, bookings rose 2.4 percent, the biggest increase since March. They were forecast to rise 1.8 percent.

Business Investment

The capital goods orders excluding aircraft non-defense is considered an indicator of business investment in the future. The revised fall in October compared with a 4.5 percent decline previously estimated. In the last three months, stocks rose at an annual rate of 7.1 percent, down from an increase of 11 percent in October.

The demand for computers and electronics rose 5.8 percent last month, the biggest increase since February 2009.

Shipments of capital goods excluding aircraft non-defense, which is used in the calculation of GDP, increased 1 percent after falling 1.2 percent in October.

The U.S. economy grew at a rate of 2.6 percent between July and September, the Commerce Department said yesterday. Corporate profits rose 1.6 percent during the third quarter and increased 26 percent from the same three months last year.

Industrial Production

Today's report supports others suggesting factories are contributing to growth in the fourth quarter. Last week the Fed said U.S. industrial production increased in November by the most in four months.

Some manufacturers are projecting higher earnings as orders increase. Joy Global Inc., the manufacturer of P & H Joy Mining equipment, last week announced an earnings forecast for fiscal 2011 that exceeded analysts' estimates in a survey.

"The rate of stock enhancement supports our view that mining customers continue to increase their capital spending plans," said Mike Sutherlin, CEO of Milwaukee-based company said in a statement on 15 December. "We continue to increase our production to meet forecasted demand growth."

Foreign sales are a plus for factories and exports in October rose to its highest level in more than two years, according to Commerce Department data released on 10 December. Some companies are responding to increased U.S. demand and abroad by replacing obsolete equipment and the expansion of its plants on line.