November 25, 2015 / 1:56 PM / 2 years ago

U.S. business spending gauge surges, durable goods orders soar

WASHINGTON, Nov 25 (Reuters) - - A gauge of U.S. business investment plans surged in October, the latest suggestion that the worst of the drag from a strong dollar and deep spending cuts by energy firms was over.

Semi-truck trailers are shown at the Port of Long Beach in this aerial photograph taken above Long Beach, California August 5, 2015. REUTERS/Mike Blake

The Commerce Department said on Wednesday non-defense capital goods orders excluding aircraft, a closely watched proxy

for business spending plans, increased 1.3 percent last month after an upwardly revised 0.4 percent rise in September.

Economists polled by Reuters had forecast these so-called core capital goods orders rising only 0.4 percent after

September’s previously reported 0.1 percent dip.

The report came on the heels of data this month showing a solid increase in manufacturing output in October. A survey of

factories also showed a rise in new orders last month. Manufacturing, which accounts for 12 percent of the economy,

has been slammed by the dollar strength and the spending cuts in the energy sector. The dollar has appreciated 18.1 percent

against the currencies of the United States’ main trading partners since June 2014.

The pace of appreciation, however, is gradually slowing. Economists also believe that the bulk of spending cuts by oil

field firms like Schlumberger SLB.N in response to lower crude prices have already been implemented.

Still, manufacturing has to deal with an inventory overhang. Data on Tuesday showed businesses had not been as aggressive as

initially thought in their efforts to reduce unsold merchandise, leading to an accumulation of inventories that economists said

was unsustainable.

Shipments of core capital goods, which are used to calculate equipment spending in the government’s gross domestic product

measurement, fell 0.4 percent last month after an upwardly revised 0.7 percent gain in September.

Core capital goods shipments were previously reported to have risen 0.5 percent in September. An 8.0 percent jump in transportation equipment spending also contributed to lifting overall orders for durable goods - items ranging from toasters to aircraft that are meant to last three years or more - which surged 3.0 percent last month.

Transportation was buoyed by an 81.0 percent increase in aircraft orders. Boeing BA.N reported on its website that it

had received 59 orders last month, up from 29 aircraft orders in September. Orders for automobiles and parts fell 2.9 percent.

Reporting by Lucia Mutikani; Editing by Andrea Ricci; Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters; Messaging: lucia.mutikani.thomsonreuters.com@reuters.net

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