U.S. factory orders declined less than expected in October, indicating continuing strength in the manufacturing sector.
The Commerce Department said factory orders fell 0.1% after an upwardly revised 1.7% increase in September. Economists had expected a 0.4% drop in October.
“These data remain consistent with a solid upswing in manufacturing activity and an acceleration in corporate capital spending,” John Ryding, chief economist at RDQ Economics in New York, told Reuters.
October’s small decline in factory orders reflected an 18.5% drop in demand for civilian aircraft and a 7.6% drop in demand for defense aircraft. Excluding the volatile aircraft category, orders for non-defense capital goods — a measure of business spending plans — rose 0.3% in October.
So-called core capital goods orders surged 2.3% in September. The Commerce Department initially estimated a 0.5% decline in October.
Shipments of core capital goods advanced 1.1% last month — up from the previously reported 0.4% gain — prompting forecasting firm Macroeconomic Advisers to boost its fourth-quarter GDP growth estimate by two-tenths of percentage point to a 2.7% annualized rate. The economy grew at a 3.3% pace in the third quarter.
“The shipments revision adds upside risk to our already double-digit forecast for fourth-quarter equipment spending growth, and the revised orders data show no sign of a slowdown in capital expenditures in the months ahead,” said Jesse Edgerton, an economist at JPMorgan in New York.
Business spending on equipment increased at its fastest pace in three years in the third quarter, helping to underpin manufacturing. “The sector, which makes up about 12 percent of the U.S. economy, is also being supported by a weaker dollar,” Reuters noted.
Overall orders for transportation equipment declined 4.2% in October following a 4.7% increase the previous month. Motor vehicle orders increased 1.3% after being unchanged in September.