New orders for U.S. manufactured durable goods rose by more than expected in the month of February, according to a report released by the Commerce Department on Tuesday, although the increase was largely due to a rebound by orders in the volatile transportation sector.
The report said durable goods orders surged up by 5.7 percent in February following a revised 3.8 percent decrease in January.
Economists had expected durable goods orders to rise by 3.5 percent compared to the 4.9 percent decrease that had been reported for the previous month.
The bigger than expected increase in durable goods orders in February was largely due to a 21.7 percent jump in orders for transportation equipment, which came on the heels of a 17.8 percent drop in January.
Orders for commercial aircraft and parts soared by 95.3 percent in February after falling by 24.0 in January, as aerospace giant Boeing (BA) reported that its aircraft orders rose to 179 in February from just two in the previous month.
Excluding the jump in orders for transportation equipment, durable goods orders actually fell by 0.5 percent in February compared to a 2.9 percent increase in January. Ex-transportation orders had been expected to increase by 0.7 percent.
Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "This is a little disappointing, but not a big concern given that orders are very volatile on a month-to-month basis."
The unexpected drop in ex-transportation orders reflected notable decreases in orders for communications equipment, fabricated metal products, and machinery.
On the other hand, the report showed strong growth in orders for computers and related products, electrical equipment, appliances, and components, and primary metals.
The Commerce Department also said orders for non-defense capital goods excluding aircraft, which are seen as an indicator of business spending, fell by 2.7 percent in February after jumping by 6.7 percent in January.
However, Jennifer Lee, senior economist at BMO Capital, noted that the drop in February did not offset January's strong gain, suggesting that capital spending is picking up for all of Q1.
"Knowing how volatile the month-to-month moves are, it is best to look at a few months of data at a time," Lee said. "The first two months of 2013 are still running ahead of the prior quarter, and on a 3-month moving average basis, are up a strong 26% annualized."
"Whether you choose to take this as a sign that businesses are more confident about the outlook, or you take it as a sign that businesses are just looking for more ways to raise productivity," she added, "either way, this is encouraging for the outlook on capital spending."
The report also showed that shipments of durable goods increased by 1.0 percent in February following a 0.7 percent decrease in January.
Inventories of durable goods rose by 0.4 percent, reflecting the sixteenth increase in inventories in the last seventeen months.
by RTT Staff Writer
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