While much of the weakness in durable goods orders came from a big drop in demand for commercial aircraft, a critical category that tracks business investment spending fell by the largest amount since January.
In other economic reports Wednesday, the government said that initial claims for unemployment benefits rose to 393,000 last week, slightly more than economists had expected.
In addition, consumer spending increased 0.1 percent last month, below expectations and the weakest gain in four months. Incomes, however, were up 0.4 percent, which was slightly better than expected.
The overall decline in orders for durable goods was 0.7 percent, following a September decline of 1.5 percent. Orders for core capital goods, considered a good proxy for business investment spending, dropped 1.8 percent, the biggest decline since a 4.8 percent fall in January.
Manufacturing has been one of the strongest sectors in the economy in this subpar recovery, but the sector slowed this year as consumer demand faltered and auto factories had trouble getting parts after the natural disasters in Japan last March.
The October drop in core capital goods — nonmilitary products excluding aircraft — was expected to be a temporary setback. This category has been surging this year, spurred by tax breaks that are allowing companies to write off their investments all in one year as long as the purchases are made before the end of 2011. That has provoked a rush by companies to take advantage of this tax break, which Congress passed in an effort to spur the economy.
For October, orders for transportation products fell 4.8 percent, reflecting a 16.4 percent drop in demand for commercial planes. Orders for autos showed a solid 6.2 percent increase, reflecting solid sales gains in recent months.
Excluding transportation, durable goods orders posted a 0.7 percent increase. This gain reflected increases in areas like primary metals such as steel and heavy machinery.
The small increase in initial claims for unemployment insurance — up 2,000 from the previous week — came after two months of steady declines. The four-week average of applications, which smooths week-to-week fluctuations, fell to its lowest level since April, the Labor Department said.
The downward trend suggested companies are laying off fewer workers.
In the report on consumer spending, the Commerce Department said purchases of durable goods like autos showed a solid increase. But spending on nondurable goods, like food and clothing, fell.
The 0.4 percent increase in incomes in October was the best showing since March. Private wages and salaries drove the gain. The solid increase followed five consecutive months of weak income gains. And subtracting taxes and adjusting for inflation, income rose 0.3 percent in October.
Many Americans chose to save the extra money. The savings rate ticked up to 3.5 percent of after-tax incomes, up from 3.3 percent in September — the lowest level since December 2007, the month the recession started.
The Institute for Supply Management’s manufacturing index grew more slowly in October than September but still remained at a level indicating manufacturing was continuing to expand. Manufacturing, one of the first sectors to start growing after the recession officially ended in June 2009, has posted growth for 27 consecutive months, according to the ISM index.
Also, the Thomson Reuters/University of Michigan consumer sentiment index fell to 64.1 from 64.2 in the preliminary November report, according to a report released on Wednesday. Economists in a Reuters survey expected a final November sentiment index reading of 64.5.
Article source: http://feeds.nytimes.com/click.phdo?i=c3d717198e52764e119bd34b3640e883
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