U.S. Durable Goods Orders Unexpectedly Rose 3.4% in February
By Courtney Schlisserman
March 25 (Bloomberg) -- Orders for U.S. durable goods unexpectedly rose in February on a rebound in demand for machinery, computers and defense equipment.
The 3.4 percent increase was the biggest in more than a year and followed a 7.3 percent decrease in January that was larger than previously estimated, the Commerce Department said today in Washington. Excluding transportation equipment, orders gained 3.9 percent, the most since August 2005.
Combined with reports showing improvements in retail sales, residential construction and home resales, the figures indicate the economy is stabilizing after shrinking last quarter at the fastest pace in a quarter century. Stepped up efforts by the Obama administration and Federal Reserve to ease the credit crunch may help revive growth later this year.
``We are still seeing contraction, but there's been a slowing in the pace of contraction,'' Julia Coronado, senior U.S. economist at Barclays Capital Inc. in New York, said before the report. ``We have seen consumer spending stabilize and that means manufacturers will work off the inventories and slow down the pace of contraction in production.''
Economists forecast total durable goods orders would fall 2.5 percent, according to the median of 69 projections in a Bloomberg News survey. Estimates ranged from a drop of 4.1 percent to a 0.7 percent gain.
Excluding transportation, orders were expected to decline 2 percent, according to the Bloomberg survey.
Influence on Growth
Demand for non-defense capital goods excluding aircraft, a proxy for future business investment, climbed 6.6 percent after falling 11.3 percent the prior month, a decline that was almost twice as large as previously estimated. Shipments of those items, used in calculating gross domestic product, increased 0.6 percent last month.
Business investment in new equipment fell last quarter at the fastest pace since 1958, according to figures from Commerce. The government will issue its advance estimate on first-quarter gross domestic product in April. Economists surveyed by Bloomberg News earlier this month forecast the economy will contract 5.2 percent in the first three months of this year and 2.5 percent for all of 2009.
Orders excluding defense equipment increased 1.7 percent. Transportation equipment demand rose 2 percent, led by a 32 jump in defense aircraft and parts. Auto bookings fell 0.6 percent and demand for commercial aircraft slumped 29 percent after surging 166 percent in January.
Boeing Financing
Boeing Co. received 4 aircraft orders in February, down from 18 a month earlier, according to company data. The Chicago-based company may have to finance jet sales itself if it wants to maintain current production levels, according to aircraft lessors such as International Lease Finance Corp. Boeing has enough unfilled bookings to sustain output through the rest of the year as long as buyers can find financing.
The administration and Fed are working in conjunction to end the credit crisis. The Treasury Department earlier this week announced details of a public-private partnership plan to purchase as much as $1 trillion in devalued real-estate assets and other securities to revive lending, using $75 billion to $100 billion of its remaining bank-rescue funds.
The Fed, meanwhile, last week said it will buy as much as $300 billion in Treasury securities and an additional $750 billion in agency mortgage-backed securities, and that the central bank will keep the benchmark interest rate near zero for an extended time.
Global Slump
The slump in spending is global. U.S. exports dropped for a sixth straight month in January, falling to the lowest level in more than two years, Commerce also reported this month. U.S. sales of automobiles, semiconductors, telecommunications gear and drilling equipment to overseas buyers all dropped.
National Semiconductor Corp., the maker of chips for the five largest mobile-phone makers, said it plans to cut more than 1,700 jobs, or about 25 percent of its workforce.
``The worldwide recession has impacted National's business as demand has fallen considerably,'' Chief Executive Officer Brian Halla said in a March 11 statement.
Regional reports indicate demand may be slumping once this month. The Philadelphia Fed's index of new orders fell in March to the lowest level in more than 27 years, and a similar measure from the New York Fed decreased to a record-low.
The housing recession is making a bad situation worse for factories. Weyerhaeuser Co., North America's largest lumber producer, said it closed mills in Oklahoma and Oregon because of weak demand from homebuilders.
`Weak Market'
``Extraordinarily weak market conditions in the homebuilding industry require that we take decisive action,'' Tom Gideon, an executive vice president, said in a March 17 statement.
Today's goods report also showed order backlogs dropped and companies trimmed stockpiles. Inventories fell 0.9 percent last month and unfilled orders declined 1.3 percent.
Smaller backlogs indicate manufacturing will be slow to recover even after the economy gains traction.
Bookings for military gear jumped 35 percent.
Lockheed Martin Corp. won a U.S. military contract with a potential value of $5 billion to support and supply special operations forces worldwide, the Pentagon said March 3. The so- called indefinite delivery, indefinite quantity contract runs through March 2018 and would reach its full value only if all options are exercised.
To contact the report on this story: Courtney Schlisserman in Washington Cschlisserma@bloomberg.net
Last Updated: March 25, 2009 08:30 EDT