New orders for key U.S.-manufactured capital goods increased more than expected in January while shipments of those so-called core goods rebounded, suggesting that business spending on equipment picked up at the start of the first quarter.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.8 per cent last month, the Commerce Department said on Monday. These core capital goods orders dropped 0.3 per cent in December.
Economists polled by Reuters had forecast core capital goods orders edging up 0.1 per cent. Core capital goods orders increased 5.3 per cent on a year-on-year basis in January.
The surge in orders is at odds with business surveys that have suggested manufacturing, which accounts for 11.3 per cent of the U.S. economy, was in recession.
Business sentiment soured as the Federal Reserve aggressively raised interest rates. But demand for goods, which are typically bought on credit, continues to hold up.
Government data on Friday showed consumer spending on long-lasting manufactured goods like motor vehicles and household furnishings rebounded sharply in January, helping to boost consumer spending. Data this month from the Fed showed manufacturing production accelerating in January.
The U.S. central bank has raised its policy rate by 450 basis points since last March from near zero to a 4.50 per cent-4.75 per cent range. It is expected to deliver two additional rate hikes of 25 basis points in March and May, though financial markets are betting on another increase in June.
Last month, there were increases in orders for electrical equipment, appliances and components, machinery, primary metals as well as computers and electronic products.
Shipments of core capital goods bounced back 1.1 per cent after declining 0.6 per cent in December. Core capital goods shipments are used to calculate equipment spending in the gross domestic product measurement. Business spending on equipment contracted in the fourth quarter.
But orders for items ranging from toasters to aircraft that are meant to last three years or more tumbled 4.5 per cent in January. These so-called durable goods orders increased 5.1 per cent in December.
Orders last month were weighed down by a 54.6 per cent plunged in the volatile civilian aircraft category, which followed a 105.6 per cent surge in December. Boeing reported on its website that it had received 55 aircraft orders in January, a fraction of the 250 booked in December.
Orders for transportation equipment dropped 13.3 per cent after increasing 15.8 per cent in December. Motor vehicle orders gained 0.2 per cent.