Orders for long-lasting factory goods climbed last month due to purchases of military and civilian aircraft, overshadowing a weak start to 2017 for business investment in new machinery and other equipment.
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Orders for durable goods–products, like airplanes and dishwashers, that are designed to last at least three years–increased 1.8% in January from the prior month to a seasonally adjusted $230.35 billion, the Commerce Department said Monday. Economists surveyed by The Wall Street Journal had expected a 2.0% increase in total orders last month.
The rise came after two consecutive months of declining orders and reflected jumps in two volatile categories: a 69.9% surge in orders for civilian aircraft and parts, and a 59.9% increase in orders for defense aircraft. Excluding the transportation category, orders fell 0.2% from December.
A closely watched proxy for business investment in new equipment, new orders for nondefense capital goods excluding aircraft, fell 0.4% in January from the prior month. That was the sharpest one-month drop in the category since September.
Still, the broader trend remained positive. Total durable-goods orders were up 1.4% in January from a year earlier. Orders for nondefense capital goods excluding aircraft rose 2.6% compared with January 2016.
The U.S. manufacturing sector has gained traction in recent months following a weak stretch caused by falling oil prices, which squeezed the domestic energy industry, and a strong dollar that weighed down exports by making U.S. products more expensive for foreign customers.
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Firming global growth and stabilized energy prices have helped bolster the industrial side of the economy. A privately produced gauge of U.S. manufacturing activity, the Institute for Supply Management’s purchasing-managers index, rose in January to its highest level since November 2014.
Some U.S. companies, in the oil patch and beyond, are ramping up capital expenditures. Fixed nonresidential investment in equipment rebounded at a 3.1% annual rate in the fourth quarter after four consecutive quarters of decline, according to Commerce Department data. Broader business investment, including spending on structures and intellectual property like software, rose in late 2016 for the third consecutive quarter.
"Business investment was relatively soft for much of last year," Federal Reserve Chairwoman Janet Yellen told lawmakers in mid-February, "though it posted some larger gains toward the end of the year in part reflecting an apparent end to the sharp declines in spending on drilling and mining structures."
The overall U.S. economy has remained on track for solid if unspectacular growth. Gross domestic product, a broad measure of the goods and services produced across the U.S., expanded at a 1.9% seasonally and inflation-adjusted rate in the final three months of 2016, the Commerce Department said last month. Forecasting firm Macroeconomic Advisers on Friday projected a GDP growth rate of 2.2% during the first quarter.
By Ben Leubsdorf and Josh Mitchell
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