Durable orders ex-transportation fall in September

By Lucia Mutikani

WASHINGTON (BestGrowthStock) – Demand for long-lasting U.S. manufactured goods, excluding aircraft, unexpectedly fell last month and a key gauge of business capital spending plans also eased, underscoring the economic recovery’s tepid pace.

The report from the Commerce Department on Wednesday was further evidence of cooling in the manufacturing sector and reinforced expectations in financial markets that the Federal Reserve would ease monetary policy further next week.

Overall orders for durable goods jumped by a more than expected 3.3 percent, the largest increase since January, lifted by a surge in aircraft bookings. They had dropped 1 percent in August and economists had expected a 2 percent increase in September.

However, orders excluding transportation fell 0.8 percent after increasing 1.9 percent in August as bookings for communications equipment dropped steeply, the department said. Economists, who track this core figure closely, had expected a 0.5 percent gain.

FED MOVE STILL EXPECTED

“It’s a very uninspiring report,” said Robbert Van Batenburg, head of global research at Louis Capital Markets in New York. “This will give reasons for those calling for a forceful quantitative easing next week.”

The U.S. central bank, which has already bought about $1.7 trillion worth of Treasury and mortgage-related debt, is expected to launch a second round of asset purchases next week to drive borrowing costs down further and stimulate spending.

The Fed’s decision will be announced a day after Tuesday’s congressional election, which is widely seen as a referendum on President Barack Obama’s performance on the economy. His Democratic Party is seen facing large losses.

U.S. financial markets were little moved by the data as investors tried to gauge the magnitude of the widely anticipated second round of monetary stimulus.

Stocks on Wall Street were set to open lower, while prices for longer-dated U.S. government debt traded down. The U.S. dollar trimmed gains against the euro.

Manufacturing has been leading the economy’s recovery from the worst recession in seven decades, but the sector is showing increasing signs of fatigue, which could further slow growth.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, slipped 0.6 percent in September after a 4.8 percent increase in August, the department said. Markets had expected a 0.8 percent gain.

“Overall, these figures suggest that the industrial recovery is nearing an end. Without it, the overall economy is going to struggle,” said Paul Dales, a U.S. economist at Capital Economics in Toronto.

Last month, overall durable goods orders were boosted by a 105 percent surge in non-defense aircraft and parts, more than reversing a 30 percent plunge in August.

Boeing Co (BA.N: ) received 117 orders for aircraft in September, a huge jump from 10 bookings the prior month, according to information posted on the plane maker’s website.

Orders were also lifted by bookings for defense aircraft, which rose 30 percent, but motor vehicle and parts orders fell 0.4 percent.

Orders for primary metals and computers and electronic products also fell.

The report also showed durable goods inventories rose for the ninth straight month in September. Shipments, which go into the calculation of gross domestic product, were down for the second consecutive month.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

Durable orders ex-transportation fall in September