Ahead of the Bell: US durable goods
WASHINGTON (AP) — U.S. companies probably increased their orders for long-lasting manufactured goods in November. But orders for a key category of goods that reflects businesses' investment plans may have weakened.
Economists predict that orders for durable goods — items expected to last at least three years — rose a seasonally adjusted 0.5 percent in November, according to a survey by FactSet. The Commerce Department will release the report at 8:30 a.m. EST Friday.
In October, companies increased their orders for core capital goods, considered a proxy for business investment, 2.9 percent. It was the biggest such increase in eight months. This category excludes aircraft orders, which tend to fluctuate sharply from month to month.
But businesses might be cutting back on core capital goods because of uncertainty about how the debate over the "fiscal cliff" will be resolved. The fiscal cliff refers to the set of automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration don't reach a budget deal first.
In addition, Europe's debt crisis and slower growth overseas have cut into U.S. exports and corporate profits and raised further concern.
U.S. manufacturing shrank in November to its weakest level since July 2009, a month after the Great Recession officially ended, according to the monthly survey by the Institute for Supply Management. The manufacturing index dropped to 49.5, down from 51.7 in October. Readings above 50 signal growth in manufacturing; readings below 50 indicate contraction.
Worries about the fiscal cliff have led some companies to pull back on purchases of machinery and equipment. Economists are concerned that those cutbacks are slowing economic growth in the October-December quarter.
The government said Thursday that the overall economy grew at an annual rate of 3.1 percent in the July-September quarter. The increase occurred even though business spending on equipment and software fell at an annual rate of 2.6 percent, the first such decline since the spring of 2009, when the economy was in recession.
Many economists say further cutbacks in business investment and cautious consumer spending are likely holding growth to an annual rate of around 1.5 percent in the current October-December quarter.
But most think the economy will gradually pick up in 2013 if Congress and the administration can achieve a budget deal that removes uncertainty over taxes and spending.