Strong U.S. durable goods orders offer hope for manufacturing

Thu Feb 25, 2016 11:51am EST
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By Lucia Mutikani

WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods in January rose by the most in 10 months as demand picked up broadly, offering a ray of hope for the downtrodden manufacturing sector.

While other data on Thursday showed new applications for unemployment benefits increased last week, they remained below levels associated with a tightening labor market. The reports should help calm fears of a recession that have spooked investors on the stock market.

"The manufacturing malaise that plagued the U.S. is not broad-based. You don't get a recession when capital spending is at worst, moving sideways, and jobless claims are near cycle lows on a trend basis," said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

The Commerce Department said orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, surged 4.9 percent last month, reversing December's 4.6 percent plunge. January's increase was the largest since March and beat economists' expectations for only a 2.5 percent rise.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 3.9 percent after tumbling by a revised 3.7 percent in December. These so-called core capital goods orders were previously reported to have decreased 4.3 percent in December.

The durable goods report was the latest indication that the worst of the manufacturing downturn was probably over. Manufacturing output rose solidly in January and factory payrolls that month increased by the most since August 2013.

The report also added to data on retail sales, employment, existing home sales and industrial production in suggesting that the economy regained its footing at the start of the year after stumbling in the fourth quarter.

Manufacturing, which accounts for 12 percent of the U.S. economy, remains constrained by a strong dollar, weak global demand and capital spending cuts by oilfield service firms like Schlumberger and Halliburton following a plunge in oil prices.   Continued...

A woman shops for refrigerators at a store in New York in this file photo taken on July 28, 2010. REUTERS/Shannon Stapleton