Orders to U.S. factories for long-lasting manufactured goods rose in October, but a key category that tracks business investment plans declined sharply for a second straight month.
Orders for durable goods increased 0.4% last month following a 0.9% drop in September and an even bigger 18.3% plunge in August, the Commerce Department reported Wednesday. The two months of declines reflected big swings in the volatile category of commercial aircraft.
The small October gain was unimpressive, with declines in a number of categories including machinery, computers and primary metals such as steel.
“The data today were mostly on the soft side of expectations,” says Avery Shenfeld of CIBC WM Economics in a note to analysts.
A key category viewed as a proxy for business investment spending fell 1.3% in October after a similar 1.3% September drop. It was the biggest setback since a 1.4% May decline.
Economists believe the declines will be temporary. They note that spending by businesses on new equipment grew at a solid annual rate of 10.7% in the third quarter, and they expect further gains in the coming months as businesses invest to expand and modernize their operations.
For October, demand for transportation products rose 3.4%, reflecting strength in motor vehicles and a small decline in commercial aircraft orders. Demand for primary metals fell 2.4%, while orders for machinery dropped 1.2%.
The Institute for Supply Management reported that its closely watched gauge of manufacturing activity posted a solid gain to a reading of 59 in October, up from 56.6 in September. Any reading above 50 signals expansion.
The report is a good sign that the strength in manufacturing will continue in coming months.
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