The Commerce Department reported Friday that orders for durable goods rose a seasonally adjusted 0.7 per cent in November, compared to October, when orders had risen 1.1 per cent.
Orders for core capital goods — considered a proxy for business investment — rose 2.7 per cent in November after a revised 3.2 per cent gain in October, which was the biggest increase in 10 months. The two big gains came after a period of weakness in this category had raised concerns about flagging business investment, a driving force in this recovery.
The gains were widespread in November, with only demand for commercial aircraft showing a big decline.
The solid gains in orders in the business investment category came despite widespread concerns that businesses might be cutting back on investment because of concerns about how the debate over the "fiscal cliff" will be resolved. The fiscal cliff refers to the set of automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration don't reach a budget deal first.
In addition, Europe's debt crisis and slower growth overseas have cut into U.S. exports and corporate profits and raised further concern.
Total orders for transportation equipment dropped 1.1 per cent, reflecting a 13.9 per cent drop in orders for commercial aircraft, which offset a 3.5 per cent rise in demand for motor vehicles and parts.
Excluding transportation, orders for nondurable goods, items expected to last at least three years, rose to $220.9 billion and are up 7.3 per cent so far this year.
Demand for machinery rose 3.3 per cent, orders for primary metals such as steel were up 2.4 per cent, while demand for computers rose 3.1 per cent.
A separate survey by the Institute for Supply Management showed that U.S. manufacturing shrank in November to its weakest level since July 2009. The institute's manufacturing index dropped to 49.5, down from 51.7 in October. Readings above 50 signal growth in manufacturing; readings below 50 indicate contraction.
The government said Thursday that the overall economy grew at an annual rate of 3.1 per cent in the July-September quarter. The increase occurred even though business spending on equipment and software fell at an annual rate of 2.6 per cent, the first such decline since the spring of 2009, when the economy was in recession.
Many economists are concerned that further cutbacks in business investment and cautious consumer spending could help dampen growth in the current quarter to an annual rate of around 1.5 per cent.
But most think the economy will gradually pick up in 2013 if Congress and the administration can achieve a budget deal that removes uncertainty over changes in taxes and government spending.Suggest a correction