US durable goods demand shows economy strengthening

Demand for durable goods sees largest gain in six months, suggesting solid expansion for the manufacturing sector

Demand for a range of long- lasting U.S. manufactured goods recorded their largest gain in six months in September, cementing views of a step-up in economic growth in the third quarter and suggesting the year's final quarter started with some momentum.
The Commerce Department said on Wednesday durable goods orders excluding transportation rose 1.7 per cent after falling by a revised 0.4 per cent in August.
The rise beat economists' expectations for a 0.4 per cent increase after a previously reported 0.1 per cent dip.
But a drop in demand for transportation equipment as bookings for motor vehicles and civilian aircraft declined pulled down overall orders 0.8 per cent.
That followed a 0.1 per cent dip in August and was in line with economists' expectations for a 0.9 per cent fall.
"Demand for big ticket items seems to be alive and well," said John Ryding, chief economist at RDQ Economics in New York. "Outside of the volatile transportation sector, the gains in durable goods orders were broad based and point to a manufacturing sector that continues to expand at a solid rate."
U.S. stock index futures held their gains, while prices for Treasury debt were lower. The dollar was down versus the euro.
Transportation orders fell 7.5 per cent, the largest decline since April.
Orders for motor vehicles and parts fell 2.7 per cent, while civilian aircraft bookings tumbled 25.5 per cent. Boeing received only 59 aircraft orders, according to the plane maker's website, down from 127 in August.
The tenor of the report was further strengthened by a 2.4 per cent jump in non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending.
That was the largest increase since March and offset a downward revision to August's increase.
"The details of the durable goods report were quite constructive, pointing to building momentum in business capital investment going forward," said Millan Mulraine, senior macro strategist at TD Securities in New York.
Shipments of non-defense capital goods excluding aircraft, however, fell 0.9 per cent after rising 3.1 per cent in August.
Still, the report was more evidence that economic activity picked up in the third quarter after a weak first half.
U.S. gross domestic product grew at an annual pace of 2.5 per cent in July through September period, according to the median of a Reuters poll. That would mark a sharp step-up from the 1.3 per cent logged in the second quarter.
Although manufacturing has slowed in recent months, the September durable goods report pointed to underlying resilience.
Details of the report, outside transportation were fairly upbeat, with orders for machinery, primary metals, electrical equipment and computers and electronic products rising solidly.
Unfilled orders increased 0.8 per cent last month and inventories barely rose, indicating factories will remain busy for a while.