Washington, Feb. 27 (Bloomberg) -- U.S. durable goods orders rebounded more than expected in January, sparked by a surge in bookings for business equipment and automobiles, a government report showed. A 3.3 percent increase in orders for big-ticket items made to last at least three years followed a 0.4 percent drop in December and a 1.2 percent decline in November, the Commerce Department said. The rise in bookings suggests production will pick up as companies replenish inventories drawn down by consumer purchases. Shoppers snapped up autos and appliances at the end of last year. Business equipment orders rose the most since October. Sustained spending by companies is needed to help the economy accelerate, economists said.
``Through January, manufacturing clearly was rebounding,'' said James O'Sullivan, an economist at UBS Warburg LLC in Stamford, Connecticut, before the report. ``Companies cut back too much at the end of last year, and spending proved to be more resilient than expected.' Economists had forecast a 1 percent increase in durable goods orders to $171.8 billion for the month after a previously reported 0.2 percent decline in December, according to the median of 55 forecasts in a Bloomberg News survey. Orders to manufacturers may have tapered off in February as a snowstorm brought business in the northeast U.S. to a halt in midmonth and the threat of a war in Iraq intensified. Consumer confidence plunged in February to the lowest in more than nine years and manufacturing slowed in the state of New York and in the Philadelphia region, according to recent government and industry reports.
Capital Goods
Orders for durable goods excluding transportation equipment rose 2.5 percent last month after rising 1 percent in December, the first back-to-back gains since a three-month series of increases from March-May 2002. Orders for non-defense capital goods excluding aircraft, a proxy for future investment, increased 5.4 percent in January, the most since a similar rise in October. Shipments, which the government uses to help construct quarterly gross domestic product measures, increased 4.1 percent after falling 1.4 percent. ``There are some signs that business investment is coming back,'' said Rick MacDonald, an economist at MMS International in Belmont, California, before the report. ``Investment spending isn't going to be the strong leg of support it was in the 1990s. As we get further into the year, it's going to provide more support, but I don't think it's going to prove the support that some people are still hoping for.''
Vehicle Orders
Orders for motor vehicles and parts rose 10.7 percent after falling 6 percent in December. The jump in orders came after car sales surged to an 18.3 million vehicle annual rate in December, the fastest in more than a year. General Motors Corp., the world's largest automaker, reported that sales jumped 36 percent in December from a year earlier as discounts and cheap financing costs lured shoppers. The sales pace left the automaker with 77 days' worth of cars on hand at the end of the year, compared with a 93-day supply at the end of 2001. General Motors also said that it had a 62-day supply of trucks on hand, down from 75 days at the end of 2001. Inventories of durable goods fell 0.1 percent last month, today's report showed. The report no longer includes semiconductors because chipmakers such as Intel Corp. have stopped participating in the survey. Bookings for commercial aircraft and parts fell 19.8 percent after surging 21.4 percent in December. Boeing Co., the world's biggest aircraft maker, said it received 24 aircraft orders, down from 31 the previous. All the planes except for one were ordered by foreign countries.
Computers
Orders for computers and electronic products rose 3.2 percent after rising 3.9 percent. Communications equipment orders surged 46.1 percent. In December, orders in that category fell 15.8 percent. Orders for electrical equipment, appliances and components rose 0.8 percent after falling 0.9 percent. Appliances have been in demand following record home sales last year. Maytag Corp., the third-biggest appliance maker, had fourth-quarter net income of $3.25 million because of rising sales of high-price appliances such as the $800 JetClean II three-rack dishwasher and the Hoover WindTunnel V2 upright vacuum.
The buildup for a possible war with Iraq and efforts to root out terrorism has boosted military spending. Government spending for defense equipment fell 2.3 percent after surging 39 percent. Compared with January of last year, defense capital goods are up 48.6 percent. Computer Sciences Corp., the third-largest U.S. seller of technology services, announced last week that it won an eight-year $700 million contract to help develop and install computer networks for the U.S. Army. The contract also covers aircraft refurbishment and airstrip construction. Economists foresee an economic growth spurt in the second half of 2003, based on projections that business spending will revive and that a war in Iraq will be short-lived. Forecasters say that growth will quicken to a 3.8 percent pace in the year's final three months. //www.quote.bloomberg.com/