Durable goods orders rise 1 percent in September

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October 28, 2009

Anonymous The Salem News Wed Oct 28, 2009, 11:13 AM EDT

WASHINGTON (AP) — Orders to U.S. factories for big-ticket manufactured goods rose in September as the biggest jump in demand for machinery in 18 months offset weakness in commercial aircraft and autos.

The second advance in three months for durable goods orders is a hopeful sign for the manufacturing sector, which has helped lead the early stages of the fledgling economic recovery. But many economists worry that demand could falter in the months ahead as various government stimulus programs wind down.

The Commerce Department said Wednesday that orders for items expected to last at least three years increased 1 percent last month, matching economists' expectations. Excluding transportation, orders rose 0.9 percent, slightly better than the 0.7 percent that economists had forecast.

A 7.9 percent rise in orders for machinery, the best showing since an 8.5 percent surge in March 2008, led the overall increase.

Orders for non-defense capital goods, considered a good proxy for businesses' investment plans for new equipment, rose 2 percent, the strongest advance since June.

Last month's rise in orders followed a 2.6 percent decline in August and a 4.8 percent surge in July, indicating that any recovery from the recession likely will proceed in fits and starts.

Paul Ashworth, senior U.S. economist at Capital Economics in Toronto, said a large part of the September increase reflected a jump in demand for military equipment rather than strength in the private sector.

"The recovery is still struggling to gain any forward momentum," he wrote in a note to clients.

Demand for transportation equipment rose 1.1 percent after a 9.1 percent plunge in August. Orders for defense aircraft rose 12.5 percent last month, offsetting a 2.1 percent drop in demand for commercial aircraft and a 0.1 percent dip in orders for autos and auto parts.

The auto sector had posted two months of gains, helped by the Cash for Clunkers government sales incentive program. But that program, which offered car buyers up to $4,500 to trade in their old models for new cars, ended in August.

Besides the surge in demand for machinery, orders for primary metals such as steel rose 0.3 percent. Orders for computers and related products increased 0.4 percent in September.

Analysts expect that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3.3 percent in the July-September quarter after contracting for a record four straight quarters. The third-quarter GDP report is due out Thursday.

If businesses are encouraged by the early signs of recovery, they could start hiring back the millions of workers who were laid off during the recession, providing an important boost to consumer spending. But many employers appear reluctant to hire back those workers until there are more signs of a rebound.

Caterpillar Inc. announced Monday that about 2,500 laid-off workers will be permanently cut from the company. They were among more than 22,000 employees laid off earlier this year as the world's largest maker of mining and construction equipment scaled back production due to weaker demand. Caterpillar last week said it was seeing encouraging signs that a recovery was under way, even as it reported a 53 percent decline in third-quarter earnings.

Also this month, Texas Instruments Inc. reported third-quarter profits and sales that were slightly above expectations. The company also said its largest division, which makes analog chips used in digital music players and other gadgets, enjoyed 20 percent growth for the second straight quarter.

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