Bloomberg News

Orders for Durable Goods Probably Fell in Jan.

February 28, 2012

Walter Moore, right, and Geo Shorty weld the inside of a safe at the Champion Safe Co. manufacturing facility in Provo, Utah, U.S. Photographer: George Frey/Bloomberg

Walter Moore, right, and Geo Shorty weld the inside of a safe at the Champion Safe Co. manufacturing facility in Provo, Utah, U.S. Photographer: George Frey/Bloomberg

Orders for U.S. durable goods probably declined in January for the first time in four months as aircraft demand slowed, economists said before a government report today.

Bookings for goods meant to last at least three years fell 1 percent after a 3 percent increase the prior month, according to the median forecast of economists surveyed by Bloomberg News. Demand for durable goods excluding transportation equipment was little changed after four consecutive gains, economists projected. Home prices fell and consumer confidence increased, other reports may show.

Factories remain at the forefront of the expansion that began in June 2009, spurred by a stronger auto demand and business investment in equipment. At the same time, rising fuel costs and an economic slowdown in Europe may temper the industry that accounts for about 12 percent of the world’s largest economy.

“Manufacturing is generally resilient,” said Sean Incremona, a senior economist at 4Cast Inc. in New York. “We don’t see it accelerating but it can continue to see a pickup.”

The Commerce Department will report the durables figures at 8:30 a.m. in Washington. Estimates of the 78 economists surveyed by Bloomberg ranged from a drop of 4.3 percent to a gain of 1.5 percent.

A slowdown in airplane bookings probably contributed to the overall decline, economists said. Boeing Co., the largest U.S. aircraft maker, said it received 150 orders last month, down from 287 in December.

Capital Goods

Orders for non-defense capital goods excluding aircraft, a proxy for business investment in items such as computers, engines and communications gear, fell 1.4 percent after a 2.9 percent gain, according to the median forecast.

A decrease last month would extend a pattern of declines at the start of a quarter that are later reversed. Since the end of 2005, orders for non-military capital goods have dropped in the first month of a quarter in all but three instances.

Orders for business equipment jumped 3.1 percent in December, the biggest gain in nine months as some companies rushed to qualify for a government tax credit that expired at the end of 2011 and allowed for 100 percent depreciation on equipment purchases. The allowance this year is 50 percent.

“Core capital goods -- a good proxy for business capital spending -- which surged toward yearend to take advantage of the expiring full depreciation allowance, are expected to push higher still as an improving economic environment prompts businesses to invest,” said Benjamin Reitzes, a senior economist at BMO Capital Markets in Toronto.

February Gains

Other gauges showed a stronger pace of manufacturing at the beginning of the year. The Institute for Supply Management’s factory index rose in January to a seven-month high. The strength continued into February as regional Federal Reserve reports showed manufacturing accelerating in the New York and Philadelphia areas.

Those gains help 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 20 percent so far this year, compared with an 8.7 percent increase for the S&P 500 Index.

Cleveland-based Eaton Corp. (ETN), a maker of hydraulic products and circuit breakers, is among those manufacturers that are benefiting.

“Durables have had pretty much had a V-shaped recovery in the United States,” Jim McGill, chief human resources officer, said during a Feb. 24 investor meeting. “The good news here is that this has been sustained primarily by growth in capital goods. We think that gives us some traction, some confidence in expecting that the recovery will continue into 2012.”

Consumer Confidence

A rally in stocks that started in late 2011 and a stronger labor market are bolstering consumer confidence. The Conference Board’s gauge of sentiment, due at 10 a.m. in New York, climbed to 63 this month from 61.1 in January, according to Bloomberg survey median.

At the same time, rising oil prices pose a threat to sentiment. A gallon of regular unleaded gasoline climbed to $3.70 as of Feb. 26, the highest since August, according to AAA, the nation’s largest automobile association.

Property values continue to limit a recovery in the housing market, the industry that precipitated the last recession. The S&P/Case-Shiller index of home prices in 20 cities fell 3.7 percent in December from a year earlier, matching the drop in the 12 months through November, economists forecast the Feb. 28 data to show.

                          Bloomberg Survey

================================================================
                          Durables Durables Case Shil Consumer
                            Orders Ex-Trans  Monthly     Conf
                              MOM%     MOM%     YOY%    Index
================================================================

Date of Release              02/28    02/28    02/28    02/28
Observation Period            Jan.     Jan.     Dec.     Feb.
----------------------------------------------------------------
Median                       -1.0%     0.0%    -3.7%     63.0
Average                      -0.8%     0.1%    -3.7%     63.3
High Forecast                 1.5%     2.0%    -3.2%     67.8
Low Forecast                 -4.3%    -2.9%    -4.1%     58.0
Number of Participants          78       49       31       76
Previous                      3.0%     2.2%    -3.7%     61.1
----------------------------------------------------------------
4CAST                        -0.7%     0.5%    -4.0%     65.0
ABN Amro                     -1.0%     ---      ---      61.0
Action Economics             -1.0%    -0.5%     ---      66.0
Aletti Gestielle             -1.7%     ---      ---      63.5
Ameriprise Financial         -1.2%     0.7%     ---      63.0
Analytical Synthesis          ---      ---     -3.9%     ---
Banca Aletti                 -2.0%     ---      ---      62.5
Banesto                      -1.0%     ---     -3.6%     62.7
Barclays Capital             -1.5%    -1.0%    -3.8%     64.0
BBVA                         -0.5%     0.5%    -3.5%     62.0
BMO Capital Markets           1.1%     0.5%    -3.7%     62.5
BNP Paribas                   0.8%     2.0%     ---      63.0
BofA Merrill Lynch           -1.5%     1.0%     ---      63.0
Briefing.com                 -1.3%     0.6%    -3.6%     63.5
Capital Economics             1.2%     0.0%    -3.5%     62.0
CIBC World Markets           -0.5%    -0.5%     ---      ---Citi
-2.5%     0.0%     ---      66.0
ClearView Economics           0.5%     ---      ---      63.0
Comerica                     -1.5%     ---      ---      61.1
Commerzbank AG               -1.0%     0.5%    -3.7%     60.0
Credit Agricole CIB          -1.0%    -0.5%     ---      62.5
Credit Suisse                -1.5%    -1.0%    -4.0%     65.0
Daiwa Securities America     -1.5%     ---      ---      62.0
Danske Bank                  -1.0%     ---      ---      62.0
DekaBank                     -2.0%    -1.0%     ---      64.0
Desjardins Group             -1.5%     ---     -3.6%     61.0
Deutsche Bank Securities     -2.0%     0.0%     ---      65.0
Deutsche Postbank AG         -0.5%     0.5%     ---      63.5
DZ Bank                      -0.1%    -0.3%    -3.5%     62.5
Exane                        -1.8%     1.0%     ---      63.5
Fact & Opinion Economics      0.5%     ---     -3.5%     62.5
First Trust Advisors         -1.3%     1.4%     ---      63.5
FTN Financial                 0.4%    -0.3%     ---      62.7
Goldman, Sachs & Co.         -1.0%     ---      ---      65.0
Helaba                       -2.0%     ---      ---      62.0
Herrmann Forecasting          ---      ---     -3.7%     64.1
High Frequency Economics     -1.0%     1.0%     ---      65.0
HSBC Markets                 -1.1%    -0.3%    -3.8%     64.0
IDEAglobal                   -1.0%    -0.5%    -3.4%     63.0
IHS Global Insight            1.1%     ---     -4.0%     58.0
Informa Global Markets       -2.5%     ---      ---      62.0
ING Financial Markets         1.0%     0.0%    -3.7%     62.5
Insight Economics            -1.5%     ---     -3.7%     63.0
Intesa Sanpaulo              -1.3%     0.5%     ---      62.5
J.P. Morgan Chase            -2.1%    -0.9%    -3.8%     64.0
Janney Montgomery Scott      -0.1%     0.0%    -3.4%     65.3
Jefferies & Co.              -1.6%     ---      ---      62.0
John Hancock Financial        1.4%     1.1%     ---      65.3
Landesbank Berlin             1.5%    -1.0%     ---      64.0
Landesbank BW                 ---      ---      ---      61.0
Market Securities            -1.4%     ---     -3.7%     ---MET
Capital Advisors          1.2%     ---      ---      ---Mizuho
Securities             1.0%    -1.0%     ---      62.0
Morgan Keegan & Co.          -4.3%     ---      ---      ---
Morgan Stanley & Co.         -1.5%     ---      ---      62.5
National Bank Financial       0.5%     0.0%     ---      62.5
Natixis                       0.5%     1.0%    -3.5%     61.3
Nomura Securities             0.1%    -0.2%    -4.1%     65.0
Nord/LB                      -1.4%    -0.3%     ---      62.5
OSK Group/DMG                -2.2%     ---      ---      ---
O’Sullivan                   -1.7%     0.0%     ---      67.0
Parthenon Group               0.3%     0.4%    -3.5%     64.2
Pierpont Securities           0.0%     ---      ---      64.0
PineBridge Investments        1.0%     1.0%     ---      66.0
PNC Bank                     -2.0%     1.0%     ---      62.0
Raiffeisenbank International  0.5%     0.0%     ---      62.0
Raymond James                -2.3%    -0.3%     ---      62.5
RBC Capital Markets          -0.9%    -0.7%     ---      62.0
RBS Securities               -2.0%     ---      ---      62.0
Scotia Capital               -1.5%    -0.5%     ---      63.5
SMBC Nikko Securities         0.7%     0.0%    -3.5%     63.0
Societe Generale             -0.8%    -2.9%     ---      67.8
Standard Chartered           -2.0%     ---     -3.8%     63.0
Stone & McCarthy Research    -1.8%     ---      ---      66.0
TD Securities                -2.0%     0.5%    -3.2%     64.8
UBS                          -0.9%     1.1%    -3.8%     65.0
Union Investment              ---      ---      ---      61.5
University of Maryland       -0.5%     ---     -3.5%     63.5
Wells Fargo & Co.            -1.0%     0.3%     ---      63.2
WestLB AG                    -1.5%     ---     -3.6%     62.8
Westpac Banking Co.          -1.5%     ---      ---      64.0
Wrightson ICAP                0.5%     ---      ---      67.0
================================================================

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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


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