By Bob Willis Feb. 25 (Bloomberg) -- Orders for U.S. durable goods excluding transportation unexpectedly declined in January as demand for business equipment weakened. Orders unexpectedly fell 0.6 percent, the biggest drop since August, figures from the Commerce Department showed today in Washington. Bookings for all goods meant to last several years rose 3 percent, more than anticipated and reflecting a jump in commercial aircraft. A separate report showed first-time jobless claims unexpectedly increased to a three-month high. Factories may be taking a pause to gauge demand after boosting production in the second half of 2009 as companies replenished inventories. Restrained consumer spending and home sales underscore Federal Reserve Chairman Ben S. Bernanke’s comments yesterday that the recovery is “nascent” and still requires interest rates near zero. The decline in capital goods spending “might pour a little cold water on the idea that strong capital expenditures will lead to above-trend growth in the first half,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “On the other hand, the capital expenditures recovery remains intact.” U.S. stock-index futures extended declines after the report and Labor Department figures that showed first-time claims for jobless benefits rose by 22,000 to 496,000 in the week ended Feb. 20. The figure compares with a median forecast of 460,000 claims. Stock-Index Futures Futures on the Standard & Poor’s 500 Index dropped 1 percent to 1,092.8 at 8:57 a.m. in New York. Economists forecast orders for durable goods orders excluding transportation equipment, which includes commercial aircraft and tends to be volatile month to month, would rise 1 percent, according to the median of 42 economists surveyed by Bloomberg News. In December, they increased 2 percent. All durable goods orders were forecast to rise 1.5 percent, the survey showed. Estimates in the Bloomberg survey ranged from a decline of 0.5 percent to a gain of 5 percent. The larger-than-expected increase in total durable goods orders reflected a 126 percent jump in demand for commercial aircraft. Boeing Co. said it received orders for 59 aircraft two months ago, up from nine in November and an increase that wasn’t captured in the Commerce Department’s durables data for December. The world’s second-biggest airplane maker said it received 10 orders in January. Orders for motor vehicles and parts dropped 2.2 percent in January after a 5.5 percent gain. Capital Goods Shipments Shipments of non-defense capital goods excluding aircraft, which are used in calculating gross domestic product, declined 1.5 percent in January after a 2.4 percent gain in December. Bookings for such goods, a proxy for future business spending, fell 2.9 percent last month. Orders for machinery slumped 9.7 percent in January, the most in a year, while demand increased for primary metals, communications equipment and computers. Purchases of equipment and software added 0.8 percentage point to fourth-quarter economic growth, according to Commerce Department figures released Jan. 29. Today’s figures suggest the pace of such investment may not be sustained in the current quarter. Spending on equipment and software rose at a 13.3 percent annual pace in the fourth quarter, the fastest since 2006, the Commerce Department said in the report on gross domestic product. Efforts to stabilize inventories accounted for 3.4 percentage points of the fourth quarter’s 5.7 percent pace of economic growth. Inventories of Durables Inventories of durable goods were unchanged in January after a 0.2 percent decrease, today’s report showed. Manufacturing, which accounts for 12 percent of the economy, expanded in January at the fastest pace since August 2004, according to the Institute for Supply Management’s factory index released Feb. 1. Sales at manufacturers, wholesalers and retailers increased in the seven months through December, the Commerce Department reported Feb. 12. The rise left businesses with 1.26 months’ supply of goods on hand, the fewest since June 2008. Manufacturers are also benefiting from rising exports as global demand recovers after the worst slump since World War II. A 10 percent drop in the value of the dollar from a four-year high on March 3, 2009 is making American goods more competitive. Exports have risen for eight consecutive months since reaching a three-year low in April. Bernanke on Economy “Private final demand does seem to be growing at a moderate pace,” Bernanke told lawmakers yesterday. The Fed chairman, who continues his semiannual testimony today, said slack labor markets and low inflation would allow the Fed to keep the benchmark lending rate low “for an extended period.” Some manufacturers are beginning to bring back workers or hire. Caterpillar, the world’s largest maker of bulldozers and excavators, is recalling about 100 laid-off technicians at an Indiana plant because of increased demand and may be hiring more, Bridget Young, a Caterpillar spokeswoman, said Feb. 18. “Caterpillar may be recalling or hiring employees in business units at various facilities this year based on demand fluctuation,” Young said. Factories added 11,000 workers to payrolls in January, the first increase in three years and the most since April 2006, the Labor Department said on Feb. 5. Overall, payrolls declined by 20,000, and the unemployment rate fell to 9.7 percent. An absence of job growth is limiting optimism even as the economy expands. The Conference Board reported Feb. 23 that consumer confidence fell to a 10-month low in February, while a measure of current conditions slumped to the lowest level in 27 years. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Source