WASHINGTON (Reuters) -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% last month, the Commerce Department said on Monday. These core capital goods orders dropped 0.3% in December.
Economists polled by Reuters had forecast core capital goods orders edging up 0.1%. Core capital goods orders increased 5.3% 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% 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%-4.75% 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% after declining 0.6% 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% in January. These so-called durable goods orders increased 5.1% in December.
Orders last month were weighed down by a 54.6% plunged in the volatile civilian aircraft category, which followed a 105.6% 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% after increasing 15.8% in December. Motor vehicle orders gained 0.2%.
(Reporting by Lucia Mutikani; Editing by Dan Burns and Andrea Ricci)
