Boeing 787 Dreamliner jet takes off at its long-awaited first flight Dec. 15, 2009Stephen Brashear
Durable goods orders in the United States are forecast to have climbed as a result of the takeoff in demand for Boeing Inc. aircraft and a global pickup in the automotive industry, economists say.
The data, set for release today, are volatile. Overall durable goods orders are expected to have increased 0.6 per cent in February, following a 2.6-per-cent jump in January, according to a survey of economists by Bloomberg.
Excluding transportation, orders are forecast to have increased 0.6 per cent in February after getting the year off to sluggish start with a month-over-month decline of 1 per cent in January.
What are the expectations? The slow start to the year was the result of a steep decline in core capital goods orders, which economists consider a good proxy for capital spending.
Those orders plunged 4.1 per cent in January, but are likely to have recovered, although not enough to erase the previous decline, said Benjamin Reitzes, an economist with BMO Nesbitt Burns Inc.
The risk for investors is that durable goods orders may have been hurt by the U.S. snowstorms, economists say.
But there are reasons for optimism. On a year-over-year basis, durable goods orders are up nearly 10 per cent and are projected to climb even higher in the coming months, said Meny Grauman, a senior economist with CIBC World Markets Inc.
Business spending on equipment in the United States set a torrid pace during the fourth quarter of 2009, increasing 18 per cent, and is likely to continue to increase, although at a slower rate, Mr. Grauman said.
"We expect it could be quite solid during the first half," he said.
How will the markets react? Among the sectors where spending has been strong are information technology, manufacturing equipment and machine tool orders, economists say.
However, because the data are volatile - often consisting of big-ticket items - the direction of the data over time is critical, Mr. Grauman said.
"The statistical precision for a lot of the sectors is not as accurate as you might expect," he said. "The idea is to focus on the aggregate data over a period of a few months."
CIBC World Markets Inc. expects the durable goods orders being reported today will be higher than the consensus estimates.
If the forecast is accurate, that could cause U.S. Treasuries to decline in price, pushing yields higher, while at the same time providing a lift for equities and the U.S. dollar, it said.