The Commerce Department said on Wednesday that orders for so-called core capital goods, which include industrial machinery, construction equipment and computers, rose 6.3 percent in January from December. A sharp drop in demand for commercial aircraft caused overall orders for durable goods, items expected to last at least three years, to fall 5.2 percent, the first decline since August.
Orders for commercial aircraft are volatile from month to month and can cause large swings in the overall figure. Boeing reported orders for only two planes in January, down from 183 in December. Orders for military equipment also plummeted by the most in more than 12 years.
The increase in core capital goods suggests companies are willing to expand their production capacities despite worries that automatic government spending cuts will slow the economy in the coming months.
“The fact remains that capital spending appears to be holding up very well,” said Dan Greenhaus, chief global strategist at BTIG, a brokerage firm. “In fact, it appears to be accelerating.”
Still, the jump in orders was not broad based and occurred mostly in machinery and manufactured metal products. Orders for computers and communications equipment both fell, and orders for autos and auto parts were unchanged.
And even with the increase, orders have mostly just recovered last year’s losses. Total core capital goods orders reached $67.7 billion in January, just above December 2011’s level.
Several economists warned that orders were likely to fall in the coming months after such a big gain.
“We don’t expect businesses suddenly to throw caution to the wind,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.
About $85 billion in spending cuts are scheduled to begin on Friday, and there is little sign that the White House and Congress will reach a deal to avoid them. Defense Department officials may have slowed purchases in January in anticipation of the cutbacks.
Business investment plans have held up in recent months despite the uncertainty surrounding tax and spending policies. Core capital goods orders dipped 0.3 percent in December but posted strong gains of 3.3 percent in November and 3 percent in October.
Separately, a measure of the number of Americans who signed contracts to buy homes rose in January from December to the highest level in more than two and a half years. The increase suggests sales of previously occupied homes will continue rising in the coming months.
The National Association of Realtors said on Wednesday that its seasonally adjusted index for pending home sales rose 4.5 percent last month to 105.9 — the highest level since April 2010, when a homebuyer’s tax credit was about to expire.
There is generally a one- to two-month lag between a signed contract and a completed sale.
Pending home sales rose in all regions, but just barely ticked up in the West, where a limited supply of available homes was holding sales back.
The increase was the latest positive report for the housing market, which began recovering last year after a deep, six-year slump.
Article source: http://www.nytimes.com/2013/02/28/business/economy/capital-goods-orders-jump-in-january.html?partner=rss&emc=rss
