WASHINGTON – Orders for big-ticket manufactured goods increased in October by the largest amount in a year, reflecting a surge in demand for commercial airplanes. The category that tracks business investment spending showed a far more modest advance, indicating this key category remains under stress.
Orders for durable goods rose 4.8 per cent in October, the Commerce Department reported Wednesday. That is the best showing since a similar advance in October 2015. The gain primarily reflected a 94.1 per cent jump in demand for commercial airplanes, an extremely volatile category.
The category that tracks business investment plans was up a slight 0.4 per cent, erasing only a small part of a 1.4 per cent plunge in September. Business investment spending has been a drag on the economy this year, reflecting in part big cutbacks in the energy sector.
So far this year, orders for nondefense capital goods excluding aircraft — the category used to track business investment — are down 4 per cent from the same period in 2015. This weakness in investment has held back overall growth this year.
Economists said that the small rise in the investment category should strengthen further as the energy sector stabilizes following a big plunge.
“Manufacturing is not booming, despite the headline today, but neither is it sliding into the recession some feared earlier this year,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “We expect a gradual pickup in activity.”
Economists believe the gradual gains in manufacturing will support a rebound for the overall economy in the second half of this year.
Part of the optimism stems from a view that the plunge in energy investment, fueled by the sharp fall in energy prices, is coming to an end. The count of oil drilling rigs is up 49 per cent from the low hit in May. Manufacturing has also been hurt this year by a strong dollar, which makes U.S. goods less competitive in overseas markets.
The economy, as measured by the gross domestic product, grew at a 2.9 per cent rate in the third quarter, a significant improvement after growth averaged just 1.1 per cent in the first half of the year.
In October, orders for machinery edged up a slight 0.2 per cent, while demand for primary metals such as steel fell 0.1 per cent. Orders for computers rose 6.8 per cent.