Businesses Increase Investment Spending

The Commerce Department said Wednesday that orders for capital goods outside of the military sector and excluding aircraft, a closely watched proxy for business spending, increased 1.1 percent after falling 0.2 percent in July.

That was well above economists’ expectations for a 0.3 percent rise and suggested that businesses, sitting on about $2 trillion in cash, had not responded to the recent financial market volatility by curtailing investment.

“If we were in a recession we would expect to see business orders for capital goods plummeting and they are not,” said Richard DeKaser, an economist at the Parthenon Group in Boston.

The solid rise in investment spending, which was accompanied by a 2.8 percent rise in shipments of capital goods, prompted some economists to raise forecasts for third-quarter economic growth.

J.P. Morgan lifted its growth forecast for the economy to an annual rate of 1.5 percent from 1.0 percent, while the forecasting firm Macroeconomic Advisers raised their projection to 2.1 percent from 1.7 percent.

“While we don’t yet know the split between how much went to domestic versus foreign buyers, this almost certainly implies another solid quarter for capital equipment spending,” said Michael Feroli, an economist at J.P. Morgan in New York.

Extreme volatility in financial markets, as politicians in Washington fought over budget policy and Europe struggled to come to grips with its debt crisis, has knocked confidence and raised the risk of a new recession.

But businesses are showing some confidence in the recovery.

Although business spending plans point to continued growth, the report also confirmed a slowing trend in manufacturing.

Overall orders for durable goods — items meant to last three years or more, like toasters and aircraft — dipped 0.1 percent after a 4.1 percent jump in July.

The orders, which are volatile from month to month, dropped despite a 23.5 percent rise in orders for civilian aircraft.

Boeing received 127 orders for aircraft, according to the plane maker’s Web site, up from 115 in July, with Delta Airlines placing an order for 100 planes.

Excluding transportation, orders also slipped 0.1 percent after rising 0.7 percent in July.

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