Tags: Orders to Factories Unexpectedly Increase

Factory Orders Rise as Manufacturing Gains Momentum

Tuesday, 04 Jan 2011 10:10 AM

Orders placed with U.S. factories unexpectedly rose in November, led by gains in demand for capital equipment that signal business investment and exports will keep contributing to economic growth.

The 0.7 percent increase in bookings compares with a 0.1 percent drop median forecast of economists surveyed by Bloomberg News and follows a 0.7 percent decrease in October that was smaller than previously estimated, figures from the Commerce Department showed today in Washington. Orders for capital goods like computers climbed 2.6 percent.

Corporate spending remains a source of strength for the U.S. economy, giving household purchases time to rebound from the worst recession since the 1930s. Manufacturing has been resilient throughout the recovery as factories are seeing demand improve, showing growth will continue in 2011.

“The manufacturing sector has maintained its strong momentum,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “It continues to be one of the brighter spots in the economy.”

Stocks swung between gains and losses, with the Standard and Poor’s 500 Index fluctuating near the highest level since September 2008, as a drop in financial and industrial shares offset gains in technology companies. The S&P 500 fell 0.2 percent to 1,269.93 at 10:33 a.m. in New York. The Dow Jones Industrial Average rose 0.1 percent to 11,682.1. The yield on the benchmark 10-year Treasury note was little changed from late yesterday at 3.33 percent.

Better Than Forecast

The median forecast was based on a survey of 53 economists. Estimates ranged from a drop of 0.7 percent to a 1.1 percent increase.

Manufacturing, which accounts for 11 percent of the economy, expanded in December at the fastest pace in seven months, a report from the Institute for Supply Management showed yesterday.

Orders for durable goods, which make up over half of total factory demand, fell 0.3 percent, less than the 1.3 percent decrease estimated by the government Dec. 23, today’s report showed.

The gain in bookings for capital goods excluding aircraft and military equipment, a measure of future business investment followed a 3.2 percent drop in October that was smaller than previously estimated. Demand for computers and electronics climbed 6.3 percent, the most since February 2009.

Capital Goods

Shipments of such equipment, which are used in calculating gross domestic product, increased 1.1 percent, better than the 1 percent gain estimated in last month’s durable goods report.

Bookings for non-durable goods, including food, petroleum and chemicals, climbed 1.7 percent, today’s report showed, which may reflect rising costs of commodities such as petroleum and food.

Factory inventories climbed 0.8 percent in November, and manufacturers had enough goods on hand to last 1.28 months at the current sales pace, the same as in the prior month.

Rising exports, which reached a two-year high in October, and improving consumer spending has prompted some companies to boost production to meet demand and also increase their own orders to replace aging equipment.

Micron Technology

Micron Technology Inc., the largest U.S. maker of computer- memory chips, last month reported its fifth-straight quarterly profit. Chief Executive Officer Steve Appleton said on Dec. 22 that the Boise, Idaho-based company benefited from demand for electronics such as Apple Inc.’s iPhone and iPad.

Jabil Circuit Inc., which provides manufacturing services, is one company benefiting from stronger emerging economies such as China and India. St. Petersburg, Florida-based Jabil said Dec. 20 that its revenue rose $4.1 billion in the three months ended Nov. 30, up from $3.1 billion a year earlier.

“At this point, in terms of U.S. spending, enterprise spending looks stable,” Timothy Main, chief executive officer of Jabil, said on a teleconference with analysts on Dec. 20. “International spending looks very strong and other areas of enterprise infrastructure are pretty robust.”

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Orders placed with U.S. factories unexpectedly rose in November, led by gains in demand for capital equipment that signal business investment and exports will keep contributing to economic growth. The 0.7 percent increase in bookings compares with a 0.1 percent drop median...
Orders to Factories Unexpectedly Increase
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2011-10-04
Tuesday, 04 Jan 2011 10:10 AM
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