By Courtney Schlisserman Nov. 25 (Bloomberg) -- Orders for goods meant to last several years unexpectedly fell in October, restrained by a drop in demand for defense equipment and a reminder the economic recovery will be slow to gain speed. The 0.6 percent decrease in bookings for durable goods followed a revised 2 percent gain in September that was larger than previously estimated, figures from the Commerce Department showed today. Excluding defense bookings, orders rose 0.4 percent. Concern that consumer spending may retrench as unemployment mounts will probably cause companies to limit spending on new equipment and keep inventories lean. While another Commerce Department report showed consumer spending rose more than forecast last month, the world’s largest economy needs a rebound in manufacturing and housing for the recovery to gain momentum. “We look for businesses to remain cautious going forward,” David Semmens, an economist at Standard Chartered Bank in New York, said before the report. “The recovery remains on track, it’s just not roaring back.” Commerce Department figures also showed spending by consumers rebounded in October more than anticipated. The 0.7 percent increase in purchases was larger than the median estimate of economists surveyed by Bloomberg News and followed a 0.6 percent September drop. Incomes climbed 0.2 percent, also exceeding expectations. Economists forecast durable-goods orders would increase 0.5 percent, according to the median of 75 projections in a Bloomberg News survey. Estimates ranged from a decline of 1 percent to a 2.1 percent gain. Excluding Transportation Excluding transportation equipment, orders fell 1.3 percent, the biggest decrease since March. These bookings were forecast to increase 0.7 percent. Less demand for machinery, computers, communications equipment in addition to defense gear contributed to last month’s decrease. Shipments for non-defense capital goods excluding aircraft, which is used in calculating gross domestic product, fell 0.2 percent in October. Bookings for such goods, a proxy for future business spending, decreased 2.9 percent in October. The figures raise questions on the sustainability of the emerging rebound in business investment. A report from the Commerce Department yesterday showed the economy grew at a 2.8 percent annual pace last quarter, less than previously estimated. Spending on equipment and software climbed at a 2.3 percent annual pace, the first gain in more than a year. Airplanes Demand for transportation equipment increased 1.5 percent, led by a 51 percent surge in orders for commercial aircraft. Auto bookings fell 0.1 percent. Auto production is moderating after surging in the three months through September as “cash-for-clunkers” incentives to buy cars expired in late August. Motor vehicle and parts production fell 1.7 percent in October, after an 8.1 percent increase a month earlier, according to industrial production figures released from the Federal Reserve on Nov. 17. Even so, auto sales rose at a 10.45 million annual rate in October, according to Bloomberg data. Ford Motor Co. Chief Executive Officer Alan Mulally said Nov. 3 he is taking a “cautiously optimistic point of view” on 2010 and the automaker will be “solidly profitable” in 2011. Inventories were little changed last month, today’s report showed. Inventories Smaller reductions in inventories following the biggest plunge in stockpiles on record will probably support economic growth in comings months. The economy will grow at a 3 percent annual rate this quarter, according to the median projection of economists in a Bloomberg News survey earlier this month. “We exited the year pretty low on inventory -- we saw higher demand for printers as we went through the end of the year,” Hewlett-Packard Co. Chief Executive Officer Mark Hurd said in an interview Nov. 23. Hewlett-Packard reported personal- computer sales for its fiscal fourth quarter that topped some analysts’ estimates. Also helping support manufacturing, exports rose in the five months through September, according to Commerce Department data. To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

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