Orders for durable goods increased 0.4 per cent last month following a 0.9 per cent drop in September and an even bigger 18.3 per cent plunge in August, the Commerce Department reported Wednesday. The two months of declines reflected big swings in the volatile category of commercial aircraft.
The small October gain was unimpressive, with declines in a number of categories including machinery, computers and primary metals such as steel.
A key category viewed as a proxy for business investment spending fell 1.3 per cent in October after a similar 1.3 per cent September drop. It was the biggest setback since a 1.4 per cent May decline.
Economists believe the declines will be temporary. They note that spending by businesses on new equipment grew at a solid annual rate of 10.7 per cent in the third quarter, and they expect further gains in the coming months as businesses invest to expand and modernize their operations.
For October, demand for transportation products rose 3.4 per cent, reflecting strength in motor vehicles and a small decline in commercial aircraft orders. Demand for primary metals fell 2.4 per cent, while orders for machinery dropped 1.2 per cent.
The Institute for Supply Management reported that its closely watched gauge of manufacturing activity posted a solid gain to a reading of 59 in October, up from 56.6 in September. Any reading above 50 signals expansion.
The report is a good sign that the strength in manufacturing will continue in coming months.