Orders for U.S. goods meant to last several years unexpectedly decreased in October, raising the risk that companies will scale back on investments in new equipment.
Demand for so-called durable goods dropped 3.3%, the biggest plunge since January 2009, after a revised 5% jump in September that was larger than previously estimated, figures from the Commerce Department showed today in Washington.
A slowdown in capital spending would deprive the world’s largest economy of a source of strength just as household purchases are starting to accelerate. While overseas demand is helping companies like Rockwell Automation Inc., there may be less of a contribution to growth from inventory rebuilding in coming months.
Another Commerce Department report today showed consumer spending rose in October for a fifth month as a rebound in incomes lifted the biggest part of the economy at the start of the final quarter of 2010.
Household purchases advanced 0.4% after a 0.3% gain in September that was larger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.5% and the Federal Reserve’s preferred measure of inflation was little changed, capping the smallest 12-month gain since records began five decades ago.
Economists forecast total durable goods orders would increase 0.1%, according to the median of 74 projections in a Bloomberg News survey. Estimates ranged from a drop of 2.7% to an increase of 4.5%.
Excluding transportation, bookings decreased 2.7%. They were forecast to increase 0.6%, according to the Bloomberg survey.
Orders for non-defense capital goods excluding aircraft, considered a proxy for future business investment, fell 4.5% after a 1.9% gain in September. The government had previously estimated such orders dropped 0.2% in September.
The swings in orders for capital goods may reflect calendar effects that the government isn’t able to capture with its seasonal adjustments.
Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, decreased 1.5% after a 1% gain in September.
The so-called core capital goods figures typically are weaker at the start of the quarter, particularly for October, according to some experts.
The world’s largest economy grew at a 2.5% annual pace from July through September, the Commerce Department said yesterday. Corporate profits increased 2.8% during the third quarter and were up 28% from the same three months last year.
Today’s report counters others suggesting factories are supporting growth in the fourth quarter.
The Federal Reserve last week said factory output increased in October by the most in three months. The 0.5% increase in the manufacturing component of the industrial production report was led by makers of autos, computers and communications gear.
Foreign sales are a bright spot for factories and exports in September rose to the highest level in two years, according to Commerce Department data released Nov. 10. Some businesses are responding to greater demand from the U.S. and abroad by replacing aging equipment and bringing more parts of their plants online.
Rockwell Automation, the maker of factory software, said it sees interest rising in large-scale plant projects for full-production lines in developed markets, a sign that those economies may be picking up steam.
Related Stories
