Oct. 28 (Bloomberg) -- Orders for U.S. durable goods rose in September for the fourth time in the past six months, a sign factories are helping ring in an economic recovery. The 1 percent increase in bookings for goods meant to last several years matched the median estimate of economists surveyed by Bloomberg News and followed a 2.6 percent drop the prior month, Commerce Department data showed today in Washington. Excluding transportation equipment, orders climbed 0.9 percent, exceeding the survey median. Gains in manufacturing are one reason why economists project a report tomorrow will show the economy expanded last quarter at the fastest pace in two years. Caterpillar Inc. and Eaton Corp. are among companies saying sales will improve in coming months as more than $2 trillion in global government stimulus boosts demand from China to Europe. “It’s an encouraging bounce back,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, who correctly forecast the gain in orders. “In the current quarter, the economy will be supported by a pickup in business investment. The recovery has some legs, albeit weak ones.” The median estimate of economists surveyed was based on 77 forecasts that ranged from a decline of 1 percent to a gain of 4.8 percent. Stocks Fall Stock-index futures held earlier losses following the report. Shares dropped worldwide on disappointing earnings reports. The contract on the Standard & Poor’s 500 Index was down 0.6 percent to 1,056.3 at 8:48 a.m. in New York. Treasury securities were little changed. Excluding transportation equipment, orders were forecast to rise 0.7 percent, according to the survey median. The government revised August data to show a 0.4 percent decline compared with an initially reported 0.3 percent drop. Bookings for transportation equipment increased 1.1 percent, led by demand for military aircraft. Orders for commercial planes and for automobiles declined. Orders excluding defense equipment increased 0.5 percent, the fifth gain in the past six months, and bookings for military gear climbed 10 percent. Shipments for non-defense capital goods excluding aircraft, used in calculating gross domestic product, fell 0.2 percent in September. For the quarter, such shipments dropped at a 1.9 percent annual pace compared with a 14 percent plunge in the prior three months, indicating business investment stabilized. Investment to Improve The report showed investment will probably improve going into 2010. Bookings for non-defense capital goods excluding planes, a proxy for future business spending, increased 2 percent in September and were up 11 percent at an annual pace for the quarter. A report from the Commerce Department tomorrow may show the economy grew at a 3.2 percent annual pace last quarter, according to the median estimate of economists surveyed. It would be the first positive reading in more than a year and the strongest performance since the third quarter of 2007. Companies seeing a turnaround include Caterpillar, the world’s largest maker of bulldozers and excavators, which issued a full-year profit forecast exceeding the highest prediction from analysts. Peoria, Illinois-based Caterpillar is considered a bellwether for its ties to construction and mining and its overseas presence. ‘Encouraging Signs’ “We are seeing encouraging signs that indicate a recovery may be under way,” Chief Executive Officer Jim Owens said in a statement on Oct. 20. “We’ve already started planning for an upturn.” A day earlier, Eaton, which makes circuit breakers and fuel pumps, reported third-quarter profit that topped analysts’ estimates and said earnings this year will be higher than previously forecast. Electrical markets in Europe and Asia are starting to recover, the Cleveland-based company said. “We believe we are seeing the European electric market start to stabilize,” Chief Executive Officer Sandy Cutler said on an Oct. 19 conference call. He still predicts the U.S. stimulus bill will add about $500 million in “incremental revenue” to Eaton in 2010. To contact the report on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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