U.S. August Durables Orders Rise 3.3%; Ex-Transport Rise 4.2%
U.S. August Durables Orders Rise 3.3%; Ex-Transport Rise 4.2%
Sept. 28 (Bloomberg) -- U.S. orders for durable goods rose a greater-than-expected 3.3 percent in August, rebounding from the biggest drop in 18 months, as businesses replenished depleted inventories before Hurricanes Katrina and Rita caused fuel prices to surge. Orders rose in all categories except defense equipment.
Bookings for expensive items made to last at least several years rose to $210.9 billion, the fourth increase in five months, after falling a revised 5.3 percent in July, the Commerce Department said today in Washington. Excluding transportation equipment, orders rose 4.2 percent last month, four times as much as expected, after a 3.7 percent drop.
Businesses started to rebuild stocks last month after the biggest increase in sales this year depleted inventories. Orders may not keep rising as companies rein in spending to offset record fuel costs after the hurricanes disrupted supplies, economists said. Less investment may hold back growth in coming months before rebuilding efforts give the economy a lift in 2006.
``It's pretty obvious businesses are going to pull back in coming months on their spending plans,'' said Christopher Rupkey, a senior economist at Bank of Tokyo-Mitsubishi in New York. ``Sales expectations after the hurricanes aren't as bright as they were earlier this year so you have to think businesses are going to scale back their spending. It's going to take a little bit off the top'' of the economy.
Economists expected durable goods orders to rise 0.7 percent to $218.2 billion, based on the median of 64 forecasts in a Bloomberg News survey, after a previously reported 4.9 percent drop in July. Estimates ranged from a decrease of 3.2 percent to a 5.7 percent rise. Orders excluding transportation equipment were forecast to rise 1 percent to $153.9 billion, after a previously reported 3.2 percent July drop. The August increase excluding transportation equipment was the most since March 2004.
Total Shipments
Total shipments, a measure of actual sales, rose 1.7 percent, the most since December. Orders for transportation equipment rose 1.4 percent after dropping 8.7 percent in July. Bookings for motor vehicles rose 0.8 percent and commercial aircraft orders rose 9.4 percent after falling 21 percent the previous month.
A jump in demand for passenger aircraft at Boeing Corp., the world's largest aircraft maker, has contributed to the volatility in orders in the last few months. After averaging 20 orders a month from January through April, bookings at Chicago-based Boeing jumped to 200 in May. It received orders for 90 aircraft in August compared with 88 a month earlier.
This month's strike by Boeing machinists may have caused shipments to slump, contributing to slower economic growth this quarter, economists said. As many as 30 plane deliveries will be delayed because of the strike, Boeing Chief Financial Officer James Bell said at a conference in Phoenix on Sept. 14. Boeing and the machinists union agreed on a contract Sept. 26.
Katrina's Toll
``Fixed investment growth should slow in the third quarter, as Katrina takes a toll on routine investment purchases, while the Boeing strike hammers capital goods shipments in September,'' said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. Englund projects business investment will grow at a 2 percent annual pace this quarter compared with an 8.4 percent gain last quarter.
Machinery orders increased 3.5 percent last month after falling 7.1 percent in July. Orders for computers and electronic products rose 5.5 percent last month after decreasing 6.5 percent. Communications equipment orders rose 3.1 percent after falling 6.9 percent.
Bookings for non-defense capital goods excluding aircraft, an indication of future business investment, rose 3.6 percent last month after falling 3.3 percent. Shipments, which the government uses to compile quarterly gross domestic product figures, rose 1.3 percent after falling 0.9 percent.
Orders for defense hardware were the only category showing a decline last month, falling 1.6 percent after an 18 percent decrease.
Inventories Dwindle
The August jump in sales caused inventories to drop 0.2 percent after a 0.8 percent gain in July. Unfilled orders, a gauge of future production, jumped 1.7 percent.
A majority of chief executives said Katrina will hurt business, and they lowered their forecasts for economic growth this year and business conditions through early 2006, a survey from the Business Roundtable last week showed. The executives expected economic growth of 3.3 percent this year, compared with 3.5 percent before the Aug. 29 storm. Only 40 percent of those surveyed expected to boost capital spending in coming months, down from 54 percent in a poll taken before the hurricane.
``While the economy, as reflected in our survey results, clearly took a hit, it does not appear to be uniformly negative,'' said Hank McKinnell, chairman of Business Roundtable and chief executive of Pfizer Inc. ``Decreased capital spending is a cause for concern because these investments have been a significant driver of long-term economic growth.''
Some companies are bracing for a slowdown in consumer spending as gasoline and heating bills jump in the wake of the storms.
Nissan Motor Co., Japan's second-largest automaker, may lower its sales forecast for the industry wide U.S. auto market, because of a ``mediocre'' outlook, Chief Executive Carlos Ghosn said last week. Nissan doesn't plan to lower the forecast for its own sales.
``I am not too optimistic about the U.S. in the next six months,'' said Ghosn, speaking to journalists in Tokyo on Sept. 22. ``We will probably have to revise the U.S. market down because people are postponing buying cars.''
-- with reporting by James Gunsalus in New York and Vivien Lou Chen in San Francisco. Editor: Rohner
To contact the report on this story: Carlos Torres in Washington ctorres2@bloomberg.net
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