Machinery order gains show U.S. companies to grow

Bloomberg News
Orders for U.S. durable goods excluding transportation equipment climbed in January by the most in a year, showing companies are planning to expand capacity. More

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ECONOMY

Machinery order gains show U.S. companies to grow

Bloomberg News
Posted 3/4/13

Orders for U.S. durable goods excluding transportation equipment climbed in January by the most in a year, showing companies are planning to expand capacity.

Bookings for items meant to last at least three years, minus things such as aircraft, climbed 1.9 percent, exceeding all forecasts of economists surveyed by Bloomberg and the biggest gain since December 2011, according to data from the Commerce Department issued last week in Washington. Another report showed pending sales of existing homes jumped more than forecast.

Demand for machinery such as construction equipment and generators jumped by the most in more than two years in January, indicating companies were relieved the U.S. avoided the brunt of the so-called fiscal cliff of tax increases and budget cuts slated to take effect at the start of the year. Growing demand from abroad will probably supplement gains in investment to ensure manufacturing keeps contributing to economic growth.

“We expect the economy to perform better in the second half of the year and firms are gearing up for that,” said Michael Carey, chief economist at Credit Agricole CIB in New York. “Plus, it’s a good time to make capital expenditures since interest rates are so low.” Carey is the best forecaster of durable goods excluding transportation for the past two years, according to data compiled by Bloomberg.

Capital goods orders excluding defense and aircraft jumped 6.3 percent in January, the most since December 2011, last week’s report showed. They are considered a proxy for future business investment in items such as computers, engines and communications gear. They have climbed 9.5 percent since October, the biggest three-month gain since 1993.

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