Demand for goods such as machinery and electronics climbed more than forecast in November, showing U.S. companies are planning to expand next year as they look beyond the tax increases and spending cuts slated to take effect.
Orders for durable goods increased 0.7 percent last month after a 1.1 percent gain in October that was larger than previously estimated, the Commerce Department reported today in Washington. The advance exceeded the median forecast of economists surveyed by Bloomberg that projected a 0.3 percent rise. Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, climbed for a second month.
Companies may be more willing to invest as global growth stabilizes and American consumers keep spending, unfazed by the deadlocked discussions on fiscal policy. Manufacturers such as Comtech Telecommunications Corp. (CMTL:US) are looking for clarity from Washington to spur a rebound in government orders.
“The numbers are encouraging,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “We’re going to start the year off slowly and gradually build momentum overt the course of 2013.”
Forecasts for total durable goods of the 63 economists surveyed by Bloomberg ranged from a 2.6 percent drop to a 3.3 percent increase.
Another report today showed consumer spending climbed in November as Americans pushed aside the threat of higher taxes next year, buying gifts for the holidays and making up for shopping lost to superstorm Sandy.
Purchases increased 0.4 percent last month after a 0.1 percent drop in October that was smaller than previously estimated, Commerce Department figures showed. The gain matched the median forecast of 80 economists surveyed by Bloomberg. Incomes rebounded after being depressed in October by lost wages due to superstorm Sandy.
Stock-index futures held earlier losses after the reports after House Republican leaders canceled a planned vote on higher taxes for top earners, sending budget talks deeper into turmoil. The contract on the Standard & Poor’s 500 Index maturing in March fell 1.5 percent to 1,418.5 at 9:07 a.m. in New York.
The increase in orders for durable goods, those meant to last at least three years, was broad-based. Machinery, computers, electrical equipment and automobiles all showed gains in November.
Demand for capital goods excluding defense equipment and aircraft, including items such as computers, engines and communications gear, climbed 2.7 percent after a revised 3.2 percent gain in October that was larger than previously estimated, today’s report on durable goods showed.
Shipments of those capital goods, used in calculating gross domestic product, increased 1.8 percent in November, the biggest gain in eight months, after a 0.6 percent gain the prior month that was previously estimated as a 0.1 percent decline. The back-to-back advance indicates business spending is rebounding this quarter.
Business investment in equipment and software slumped in the third quarter as companies waited for lawmakers to clarify tax policy. It declined at a 2.6 percent annual pace from July through September, the first drop since the second quarter of 2009, according to the Commerce Department’s figures released yesterday. It subtracted 0.19 percentage point from the 3.1 percent rate of economic growth.
“The ongoing paralysis in Washington continues to make the receipt of orders a challenge” Fred Kornberg, chief executive officer of Melville, New York-based Comtech Telecommunications, said on a Dec. 7 earnings call referring to demand from government customers. “We were hoping for some additional clarity once the presidential election was over. But worry about the election has now been replaced by panic about the fiscal cliff.”
Fed Chairman Ben S. Bernanke said a tightening in fiscal policy is a “major risk factor” that is already harming investment and hiring decisions by causing “uncertainty” or “pessimism.” The central bank “doesn’t have the tools” to offset that event, he said during a Dec. 12 press conference.
Central bank officials in the U.S. last week linked the outlook for the Fed’s main interest rate to unemployment and inflation for the first time and said they will expand the bank’s asset purchase program in January to spur the economy.
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