Capital Goods Orders in U.S. Unexpectedly Declined in September
By Jeanna Smialek - Oct 25, 2013 7:59 AM CT
Orders (DGNOXTCH) for U.S. equipment such as computers and machinery unexpectedly declined in September for the second time in three months, indicating business spending was weakening ahead of the partial government shutdown.
Bookings for non-military capital goods excluding aircraft decreased 1.1 percent, the Commerce Department reported today in Washington. The median forecast in a Bloomberg survey called for a 1 percent gain. A surge in aircraft demand led to a 3.7 percent jump in total durable orders.
Durable Goods Orders Increase on Aircraft Demand
Oct. 25 (Bloomberg) -- Orders for U.S. durable goods rose in September by the most in three months as stronger demand for commercial and military aircraft outweighed a drop in business equipment. Michael McKee reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)
“The more you look into it, the more disappointing it gets,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “It kind of raises doubts about the sustainability of the manufacturing sector to continue to underpin economic growth.”
Faster growth in manufacturing, which accounts for about 12 percent of the economy, depends on how quickly confidence is restored in the aftermath of a budget battle that shut down the government for half of this month. Results from Ford Motor Co. (F) and Whirlpool Corp. (WHR) show stronger domestic auto and housing markets remain sources of strength for the expansion.
Stock-index futures were little changed after the figures, with the contract on the Standard & Poor’s 500 Index expiring in December falling less than 0.1 percent to 1,748 at 8:51 a.m. in New York.
Orders excluding transportation equipment, where demand is often volatile month to month, fell 0.1 percent after a 0.4 percent decrease in August.
Forecasts for total durable goods orders in the Bloomberg survey of economists ranged from a 0.3 percent decline to a 7.5 percent increase. Demand rose 0.2 percent in August.
Demand for non-defense capital goods excluding aircraft decreased in September after a 0.4 percent gain in August and a 3.5 percent slump in July. Such orders are considered a proxy for future business investment in computers, electronics and other equipment.
Shipments of those products, a measure used to calculate gross domestic product, fell 0.2 percent in September after rising 1.1 percent the prior month. Sales were down 2.9 percent over the past three months at an annualized rate, compared with a 0.9 percent decline at the end of the second quarter.
Caterpillar Inc. (CAT), the biggest maker of construction and mining equipment, cut its 2013 sales and profit forecast this week after a slump in orders from commodity producers.
“There are encouraging signs, but there is also a good deal of uncertainty worldwide as we look ahead to 2014,” Chairman and Chief Executive Officer Doug Oberhelman said in a statement.
Today’s report showed bookings for commercial aircraft increased 57.5 percent in September after a 5.4 percent gain. Chicago-based Boeing Co. said it received 127 aircraft orders in September, up from 16 the previous month.
Orders for military aircraft and parts rose 15.2 percent after an 11.5 percent decrease, today’s report showed.
Demand for motor vehicles has also been a bright spot for manufacturers, with cars and light trucks selling at a 15.2 million annualized rate in September after climbing in August to the fastest annualized pace since 2007, figures from Ward’s Automotive Group showed.
“The vehicle fleet has aged, so really vehicle assembly has nowhere to go but up,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado, adding that Boeing, the world’s largest planemaker, is also looking at “a bottomless pit of orders.”
Ford earned a $2.3 billion profit in North America in the third quarter and raised its forecasts for pretax profit and operating margin for the full year. The Dearborn, Michigan-based company said yesterday its automotive sales rose 12 percent to $33.9 billion. It also earned a rare profit on overseas operations on rising demand for Focus compact cars in China and B-Max vans in Europe.
Benton Harbor, Michigan-based Whirlpool is also seeing signs of stronger demand in some parts of the world, while progress in the U.S. housing market boosts demand for its washers and dryers.
“In North America, we are increasing our industry demand assumption to approximately 9 percent for the year as we continue to see positive trends in U.S. housing,” Chief Executive Officer Jeff Fettig said on an Oct. 22 earnings call. In Latin America, “we’re now seeing a pickup in demand and we expect that positive trend to continue during the fourth quarter.”
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Economy · U.S. · Manufacturing