The 4.8% rise paced by near doubling of orders in the volatile civilian aircraft sector
By ERIC MORATH
Updated Nov. 23, 2016 9:50 a.m. ET
WASHINGTON—Demand for long-lasting manufactured goods rose in October at the fastest pace in a year, a sign the U.S. factory sector has begun to stabilize.
Orders for durable goods—products designed to last longer than three years, such as trucks, computers and metals—rose 4.8% to a seasonally adjusted $239.4 billion from a month earlier, the Commerce Department said Wednesday. Economists surveyed by The Wall Street Journal expected a 2.7% gain in overall orders.
October’s jump was driven by a near doubling in orders for civilian aircraft, a highly volatile segment, but demand for most other categories increased as well. When excluding orders tied to transportation, demand increased 1%.
September’s overall orders were revised to a 0.4% gain from a previously estimated decline. As a result, orders have increased for four straight months, but are still down slightly through the first ten months of this year, compared with the same period in 2015.
“Manufacturing is not booming,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “But neither is it sliding into the recession some feared earlier this year. Instead, we expect a gradual pickup in activity.”
Wednesday’s report entirely represents activity that occurred before the presidential election.
Measures of manufacturing activity had been choppy over the past year as a strong dollar caused U.S.-made goods to be more expensive for overseas customers.
But like recent durable-goods orders, other data points to signs of improvement. The Institute for Supply Management’s manufacturing index moved more firmly into expansion territory in October, from September. The Federal Reserve’s measure of manufacturing output rose for the fourth time in five months in October, but the index remains slightly down from a year earlier.
Wednesday’s report showed an important proxy for business investment, nondefense capital goods excluding aircraft, rose 0.4% last month, but it is down 4% through October, compared with the first ten months of last year.
Inconsistent business spending has been one factor constraining growth in gross domestic product to around 2% annually, a lackluster rate compared with other expansions since World War II.
“Business equipment investment looks to be on course for a modest rebound in the fourth quarter,” said Capital Economics economist Andrew Hunter. He said the drag on growth from weaker mining investment and trade appears to be fading.
Orders for machinery, computers and electrical equipment and appliances all increased in October. Orders for motor vehicles and parts declined.
Defense orders fell 3.7% last month. Defense orders fell the last two months after posting strong increases in July and August.
When excluding defense, overall orders rose 5.2%.
Orders for civilian aircraft and parts increased 94.1% in October from September. Boeing Co., the country’s largest aerospace firm, separately reported October orders for jetliners increased to 85 in October from 55 in September. Boeing data isn’t adjusted for seasonality.
Write to Eric Morath at [email protected]
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