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Orders for capital goods fall as business spending cools

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Orders for U.S. non-military capital equipment excluding airplanes dropped in September, indicating gains in business investment will cool.

Bookings for such goods, including computers and machinery meant to last at least three years, fell 0.6 percent after a 4.8-percent gain in August that was smaller than previously estimated, figures from Commerce Department showed Wednesday in Washington, D.C. Total orders climbed 3.3 percent last month, led by a doubling in aircraft demand.

The report raises the risk that business investment, which had been contributing to a rebound from the worst recession in generations, will decelerate in coming months, underscoring Federal Reserve Chairman Ben S. Bernanke’s concern that growth is too slow. Combined with a lack of jobs and less need to rebuild inventories, the data point to a slowdown in manufacturing.

“We’re looking at weakness in capital spending for at least the next couple of quarters,” said Tom Porcelli, senior economist at RBC Capital Markets Corp. in New York, who had predicted a drop in non-military capital goods orders excluding aircraft. “Companies are unwilling to deploy the enormous amount of cash they have as there’s skepticism about the economic backdrop. We continue to exist in a slow-growth environment.”

Total orders were projected to rise 2 percent, according to the median forecast of 76 economists in the Bloomberg survey. Estimates ranged from no change to an increase of 8 percent.

Orders for non-defense capital goods excluding aircraft are considered a proxy for future business investment. Shipments of those items, used in calculating gross domestic product, increased 0.4 percent after rising 1.3 percent in August, less than the 1.7-percent gain estimated previously.

The figures may prompt economists to lower forecasts for third-quarter business investment. The world’s largest economy grew at a 2-percent annual pace from July through September after expanding at a 1.7-percent pace in the second quarter, according to the median estimate of economists surveyed by Bloomberg News. The figures are due in two days.

Demand for total durable goods was led by a 16-percent jump in the transportation category, which is often volatile. Civilian aircraft bookings surged 105 percent after dropping 30 percent in August. Boeing Co., the world’s largest aerospace company, said it got orders for 117 aircraft last month, up from 10 in August. Industry data may not correlate precisely with the government statistics on a month-to-month basis.

Chicago-based Boeing this month raised its full-year profit forecast on rising demand, and said it is considering boosting production. Honeywell International Inc., a maker of car turbochargers and aircraft parts, also lifted its annual earnings projection.

Bookings excluding transportation equipment unexpectedly fell 0.8 percent, the second drop in three months. They were predicted to rise 0.5 percent, the survey median showed.

The drop in orders for non-defense capital equipment reflected a 19-percent decrease in orders for communications gear, the biggest decrease since January 2008.
 

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