BUSINESS
12/24/2013 08:36 EST | Updated 02/23/2014 05:59 EST

Orders to US factories for durable goods jumped 3.5 per cent in November after October decline

WASHINGTON - Businesses stepped up their orders for long-lasting manufactured goods in November. And a key category that signals business investment plans climbed at the fastest pace in 10 months.

The surge in orders for durable goods, which are products expected to last at least three years, was the latest evidence of a rebound in manufacturing. The gains will likely provide support for the economy into 2014.

The Commerce Department said Tuesday that orders for durable goods jumped 3.5 per cent last month compared with October, when they had fallen 0.7 per cent. The increase was led by a 21.8 per cent surge in demand for commercial aircraft, which can be volatile.

Core capital goods, a category that tracks business investment, rose 4.5 per cent, the biggest gain since January. This category is seen as a gauge of business plans to expand and modernize and as a measure of business confidence.

Economists said the stronger-than-expected November gain and a revision for October, which had previously been reported as a sharper 1.6 per cent drop, were encouraging signs.

"Nearly all of the major industries saw more orders coming in during November," said Jennifer Lee, senior economist at BMO Capital Markets.

She noted that machinery, fabricated metals, computers and electronics and communications equipment all showed solid gains.

Last month's rise in core capital goods, a category that excludes defence and aircraft, followed declines of 0.7 per cent in October and 1.2 per cent in September. It was the strongest gain since an 8.9 per cent increase in January.

Demand for transportation products rose 8.4 per cent, led by a surge in commercial aircraft orders. Orders for motor vehicles and parts increased 3.3 per cent. Automakers have been enjoying a banner sales year.

Orders for communications equipment shot up 13 per cent. Demand rose 5.3 per cent for computers and 3.8 per cent for machinery.

Other reports have also signalled a strengthening manufacturing sector. The Institute for Supply Management has reported that its gauge of manufacturing activity rose in November at the fastest pace in 2 1/2 years. Factories ramped up production and hiring.

According to the ISM gauge, manufacturing activity has expanded for six straight months after hitting a rough patch in the spring. A separate report showed that factories increased output in November for a fourth straight month, led by a surge in auto production.

The government said last week that the economy grew at a 4.1 per cent annual rate in the July-September quarter. It was only the second time since the recovery began in mid-2009 that annual growth has topped 4 per cent in any quarter.

Economists think annual growth has slowed to between 2 per cent and 2.5 per cent in the current quarter, reflecting a slowing in business stockpiling. But they are growing confident that the economy will gain momentum in 2014 as the drag from tax increases and federal spending cuts enacted this year fades.

Strong auto sales and a healthier housing market have boosted demand for steel and other metals, auto parts, furniture and appliances.

Overseas demand for many goods has also risen as Europe has climbed out of recession, Japan is growing faster and China's economy, while slowing, is still expanding at a healthy pace.