By Vince Golle and Timothy R. Homan
Jan. 28 (Bloomberg) -- Orders and shipments for capital goods rose in December, pointing to a pickup in business investment that will help the U.S. economy grow.
Bookings for durable goods excluding transportation equipment climbed 0.9 percent last month, more than anticipated, figures from the Commerce Department showed today in Washington. Total orders increased 0.3 percent, less than forecast, depressed by a drop in demand for commercial aircraft.
Factories will probably keep churning out more goods to stop inventories from falling and to meet growing demand from abroad. Companies such as Texas Instruments Inc. and Intel Corp. are receiving more orders, pointing to gains in investment that Federal Reserve policy makers yesterday said were contributing to the economic recovery.
“You’re starting to see a good turnaround in equipment spending,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York who forecast a 1 percent rise in orders excluding transportation. “Generally you do see equipment spending and hiring move together, so this is hopefully a good sign that business are coming out of their shells.” ‘ More Americans than anticipated filed claims for jobless benefits last week, indicating an improvement in the labor market is slowing. Initial applications declined to 470,000 in the week ended Jan. 23 from 478,000 the prior week, Labor Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a drop to 450,000.
Claims Disappoint
“The underlying trend is improving but maybe not quick as quickly as some had hoped,” said David Sloan, a senior economist at 4Cast Inc. in New York, who forecast a smaller drop in claims.
Stock-index futures trimmed earlier gains following the reports. The contract on the Standard & Poor’s 500 Index climbed 0.2 percent to 1,097 at 8:54 a.m. in New York, after having been up as much as 0.8 percent.
Economists forecast orders for all durable goods would increase 2 percent, according to the median of 70 projections in a Bloomberg survey. Estimates ranged from gains of 0.4 percent to 5.5 percent.
A surge in bookings at Boeing Co., which are often volatile, was expected to boost the overall total. The world’s second-biggest airplane maker said it received orders for 59 aircraft in December, up from nine the previous month and 14 in October. Today’s report showed demand for civilian aircraft dropped 38 percent.
Exceeds Expectations
Orders excluding transportation were projected to rise 0.5 percent, according to the survey median. Forecasts ranged from a 0.5 percent decline to a 3.1 percent increase.
Shipments of non-defense capital goods excluding aircraft, which are used in calculating gross domestic product, rose 2.2 percent in December, the biggest gain since February 2007. Bookings for such goods, a proxy for future business spending, climbed 1.3 percent last month.
The figures suggest business investment contributed to growth in the final three months of 2009. The Commerce Department tomorrow will issue its first estimate of fourth- quarter gross domestic product. The economy grew 4.6 percent at an annual rate after a 2.2 percent pace in the third quarter, according to the median forecast in a Bloomberg survey.
Fed Outlook
Fed policy makers, after their meeting yesterday, said the recovery is gaining strength and business investment “appears to be picking up.” They also repeated a pledge to keep the benchmark interest rate low for an “extended period.” The central bankers held the overnight lending rate between banks in the range near zero, where it has been for more than a year.
Companies may be gaining confidence the recovery will be sustained as demand improves. Sales at manufacturers, wholesalers and retailers increased in the six months through November. The rise left businesses with 1.28 months’ supply of goods on hand, the fewest since July 2008.
Today’s report showed inventories of durable goods decreased 0.2 percent in December for a second month.
To keep stockpiles from falling much more, factories may increase production, bolstering the economy.
Texas Instruments’ customers, who whittled down inventories during the recession, stepped up orders as the economy recovered.
‘Solid’ Demand
“With demand continuing to be solid and inventories well below historic levels, our outlook for the first quarter reflects the likelihood of sequential growth,” Rich Templeton, chairman and chief executive officer of Texas Instruments, said Jan. 25 in a statement.
The second-largest U.S. chipmaker behind Intel forecast sales that beat analysts’ estimates, fueled by demand for consumer electronics and industrial equipment.
The estimates followed a similar upbeat revenue assessment from Intel earlier this month. The Santa Clara, California-based company said it expects consumers to continue snapping up portable computers and businesses to increase technology- hardware budgets this year.
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