U.S. orders for durable goods increase
Bookings for goods meant to last at least three years rose 3.5 percent after a 0.7 percent drop the prior month, a Commerce Department report showed Tuesday in Washington. The median estimate of 75 economists surveyed by Bloomberg called for a 2 percent advance. Excluding demand for transportation equipment, which is often volatile, orders also beat projections.
Growing demand for automobiles and homes is benefiting manufacturers such as 3M Co., resulting in gains in production that will help the expansion accelerate. Investment in new equipment may also increase as consumer spending climbs and the prospect of smaller federal budget cuts next year make companies more confident.
"Manufacturing is on firmer footing," Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pennsylvania, said before the report. "We'll see less fiscal drag in 2014. Increasing final demand will translate into more orders for durable goods."
Estimates in the Bloomberg survey ranged from a drop of 0.5 percent to a gain of 5.5 percent.
Stock-index futures were little changed after the report. The contract on the Standard & Poor's 500 Index maturing in March was at 1,823.2 at 8:31 a.m. in New York, up less than 0.1 percent from Monday's close.
The durable goods data were boosted by a 21.8 percent surge in bookings for non-military aircraft, according to the Commerce Department's report. Boeing Co., the Chicago-based aerospace company, said it received orders for 110 aircraft in November, up from 79 in October.
Demand for vehicles also contributed, with orders climbing 3.3 percent, the most since February. Auto sales advanced to a 16.3 million annualized rate in November, the highest since May 2007, according to data from Ward's Automotive Group.
Excluding demand for transportation equipment, orders were up 1.2 percent, the biggest advance in six months, after a 0.7 percent rise a month earlier. They were projected to rise 0.7 percent, according to the Bloomberg survey median.
Orders for non-defense capital goods excluding aircraft, a proxy for future business investment in items like computers, engines and communications gear, increased 4.5 percent, the most since January, after a 0.7 percent drop the previous month.
Shipments of those goods, used in calculating gross domestic product, climbed 2.8 percent, the biggest gain since March 2012, after decreasing 0.4 percent in the prior month.
3M, the St. Paul, Minnesota-based maker of products ranging from electronics to dental braces, increased its quarterly dividend by 35 percent and signaled plans to spend more to spur growth, including multibillion-dollar transactions.
"We are ready to move a little bit more aggressively," Chief Executive Officer Inge Thulin said at a meeting with investors on Dec. 17. The company is looking to add technologies and to expand its "push-forward businesses" such as oral care and air and water filtration, he said.
The improvement in the economy and job market helps explain why the Federal Reserve decided to begin reducing stimulus. The central bank on Dec. 18 said it will trim monthly bond purchases to $75 billion from $85 billion starting in January.
At the same time, there is a risk that orders may soften after the pace of stockpiling in the third quarter was the fastest in three years. While gross domestic product climbed at a 4.1 percent annualized rate, the strongest since the final three months of 2011, inventories accounted for 1.7 percentage points of the advance.
Some companies are also bracing for the fallout of reduced defense spending by the government. United Technologies Corp., the maker of Pratt & Whitney jet engines and Otis elevators, said profit and revenue next year will probably fall below analysts' estimates as sluggish U.S. government sales and tax- law changes temper earnings growth.
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