Capital goods spending rebounds
U.S. companies invested in computers, communications equipment and machinery last month, boosting capital goods orders for the third time in four months.
The 4.1% increase in capital goods spending in August signaled a rebound after orders fell 5.3% in July. It also suggests that manufacturing, which has helped drive economic growth since the recession ended in June 2009, is still a bright spot in a weak recovery.
The gains in capital goods orders, along with a jump in business confidence in Germany, helped send stocks soaring Friday. The Dow Jones industrial average gained nearly 200 points.
The overall demand for durable goods fell 1.3% in August, the Commerce Department said. But that was pulled down by a significant drop in orders for aircraft. When excluding the volatile transportation sector, orders rose 2% — the best showing in five months.
The manufacturing sector has expanded for 13 straight months, as measured by the Institute for Supply Management.
Capital goods orders, which exclude transportation and defense goods, are seen as a good indicator of business spending, and economists watch them closely.
Business spending on equipment and software has been growing at a 20% annual rate over the last three quarters.
Economists had worried that July’s decline in capital goods spending was a sign the sector was slowing.