Durable orders up- more proof economy coming back

By Jeffry Bartash, MarketWatch

WASHINGTON (MarketWatch) — Orders for big-ticket items made in the U.S. soared 4.6% in December, fanned by a big batch of bookings for military and commercial aircraft.

Demand also improved for most other makers of long-lasting goods, according to government data, suggesting that U.S. manufacturers could be poised for a modest rebound in 2013.
“We got a significant pullback in the third quarter, but we have seen three months now of better data,” said Julia Coronado, chief North American economist at BNP Paribas. “It’s broad-based, too. It’s not just one sector.”
Yet U.S. stocks fell on Monday, checked in part by Caterpillar Inc.’s outlook. The chief executive of the big manufacturer of farm and other heavy equipment (NYSE:CAT) took a dimmer view of the economy, saying he expects U.S. growth to be “relatively weak in 2013.” Read about Caterpillar earnings .
In December, meanwhile, Boeing Co. (NYSE:BA) received orders for more than 180 planes and bookings for commercial aircraft leaped by 10.1%, reversing after a 12.9% decline in the prior month.
Each jet is hugely expensive and airline orders can give a temporary jolt to the durables report. So can defense spending, which is often lumpy. Demand for military goods soared last month, led by a 56.4% increase in aircraft orders.
Overall, orders rose 4.1% in 2012, the Commerce Department said.

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Stripping out transport goods, U.S. orders rose 1.3% and suggested a continued if mild expansion in the nation’s industrial sector. Orders in that category have risen 2.2% over the past 12 months.
Economists polled by MarketWatch had expected orders in December to climb 2.5% for products designed to last at least three years. These orders are a critical ingredient of U.S. growth: Rising sales of autos, planes, computers, furniture and the like signal an improving economy.
In a less positive sign, business investment in the private sector tapered off in the last month of the year after two straight strong gains. So-called core capital goods orders rose a scant 0.2%, following 3.0% gains in both November and October.
Yet the durables report is quite volatile and subject to large revisions, so economists look at longer trends. Overall business investment increased sharply in the fourth quarter after slowing in the prior three-month period.
The dropoff in investment in December may have stemmed in part from the year-end fight in Washington over the “fiscal cliff” combination of higher taxes and spending cuts. Lawmakers struck a last-minute deal to avert a crisis, but the episode may have caused businesses to delay investment decisions.

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What’s more, core orders actually fell 0.3% for all of 2012, indicating that an extended pickup is needed this year to propel the economy out of its current growth trajectory of about 2%.
The U.S. would have to grow a lot faster to boost hiring and drive down the nation’s 7.8% unemployment rate.
Manufacturers got off to a good start last year, but demand tapered off as Europe entered a recession and growth slowed around the world. Yet the latest evidence suggests the global economy is on the mend, a scenario that would give U.S. manufacturers and exporters a shot in the arm for 2013.
Meanwhile, shipments of durable goods rose 1.3% in December. Inventories fell slightly — the first drop in 14 months — and unfilled orders climbed 0.8%. Businesses briefly got caught in 2012 with excess inventories, which they’ve been reducing.
Broken down by sector, orders jumped by 3.6% in December for primary metals, by 3.3% for computers and electronic products and by 5.7% for communications gear.
Orders also rose a slight 0.4% for autos and parts.
Orders for electrical equipment and appliances stood out as the only category to post a drop, down 2.4%.
In November, the increase in orders was revised down a tick to 0.7%