Bloomberg News

Orders for U.S. Durable Goods Probably Climbed for Third Month

January 26, 2012

Jan. 26 (Bloomberg) -- Orders for U.S. durable goods probably rose in December for a third month, boosted by demand for aircraft and business equipment that signal further gain in manufacturing, economists said before a report today.

Bookings for goods meant to last at least three years climbed 2 percent after a 3.7 percent increase the prior month, according to the median forecast of economists surveyed by Bloomberg News. Demand for durable goods excluding transportation equipment advanced 0.9 percent, the fourth- straight gain, economists projected. New-home sales last month climbed to the highest level in a year and initial jobless claims rose, other reports may show.

Increases in consumer and business spending, coupled with lean inventories, may keep driving production in coming months and spur the economy. Sustained demand from China, Brazil and other emerging economies may help shield U.S. factories from a slowdown in Europe stemming from its sovereign debt crisis.

“It’s a good cruising speed for manufacturing,” said Jonathan Basile, a senior economist at Credit Suisse in New York. “It’s a good way to end the year.”

The Commerce Department will report the durables figures at 8:30 a.m. in Washington. Estimates of the 77 economists surveyed by Bloomberg ranged from a drop of 2.8 percent to a gain of 6.7 percent.

The pickup in manufacturing is being accompanied by signs of improvement in the housing market. Sales of new properties increased 1.9 percent to a 321,000 annual rate in December, according to the median projection in the Bloomberg survey before the Commerce Department’s report at 10 a.m. The gain would be the fourth straight.

Federal Reserve

Even with the advances, “strains in global financial markets continue to pose significant downside risks to the economic outlook,” Federal Reserve policy makers said yesterday in a statement after keeping interest rates near zero.

Other gauges showed a stronger pace of manufacturing at the end of last year. The Institute for Supply Management’s factory index rose in December to the highest level in six months. Measures of production and new orders increased as inventory indexes fell, indicating that output will continue to climb.

A report from the Fed on Jan. 18 showed factory production in December rose the most in a year as manufacturers churned out more computers, cars and construction material.

The gain helps explain why shares of machinery makers have outpaced the broader stock market this year. The Standard & Poor’s Machinery Supercomposite Index, which includes companies like Cummins Inc. and Caterpillar Inc., has climbed 14 percent so far this year, compared with a 5.4 percent increase for the S&P 500 Index.

Boeing Orders

An increase in durable orders excluding transportation equipment would follow a 0.3 percent gain in November. Boeing Co., the largest U.S. aircraft maker, said it received 287 orders in December, up from 96 in November.

Orders for non-defense capital goods excluding aircraft, a proxy for business investment in items such as computers, engines and communications gear, rose 1 percent after a 1.2 percent decline, according to the median forecast.

A recovering auto industry is boosting manufacturing. Ford Motor Co., the second-largest U.S. carmaker, posted a 10 percent sales gain last month from a year earlier. In 2011, 2.15 million light vehicles were sold, an 11 percent increase.

“We were able to end the year on, what we feel, is a high note,” Erich Merkle, Ford’s U.S. sales analyst, said on a conference call Jan. 4.

Harley-Davidson

Harley-Davidson Inc., the biggest U.S. motorcycle maker, this week reported a fourth-quarter profit as sales rose 12 percent from a year earlier.

Purchases were up “despite the challenging but slightly improving economic environment,” John Olin, chief financial officer at the Milwaukee-based company, said on a teleconference call. He cited “improved consumer confidence” among reasons for the gain.

Factories have also boosted payrolls. Manufacturers added 23,000 jobs in December, the most in five months, Labor Department figures showed Jan. 6.

A Labor Department report today may show first-time claims for jobless benefits rose to 370,000 last week from a four-year low of 352,000 the prior week, according to the median projection in a Bloomberg survey before the 8:30 a.m. release. The data can be volatile around holidays, and last week included Martin Luther King Day during which state employment offices were closed.

--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Carlos Torres

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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