Ahead of the Bell: Durable Goods

AP News
Posted: Oct 27, 2010 6:47 AM
Ahead of the Bell: Durable Goods

Orders to U.S. factories for big-ticket durable goods likely showed a solid gain in September, helped by a surge in demand for commercial aircraft.

Economists at JPMorgan Chase were forecasting that orders for durable goods would post a 2.3 percent increase in September following a 1.3 percent decline in August. The Commerce Department is scheduled to release the September figure at 8:30 a.m. EDT on Wednesday.

The JPMorgan economists were forecasting that orders excluding transportation would show a more modest gain of 1 percent after a 2.0 percent rise excluding transportation in August.

These analysts were also looking for a key barometer of business investment plans to slow in September as well. They forecast that orders for nondefense capital goods excluding aircraft would show a rise of 1.3 percent, much smaller than the 5.1 percent surge in August.

Overall, the advance in durable goods orders was expected to show that manufacturing was continuing to move forward but at a slower pace than earlier in the year.

Manufacturing has been a standout performer since the recession ended last year as strong foreign demand for exports has helped offset more sluggish domestic demand.

The overall economy, as measured by the gross domestic product, is expected to show growth of around 2 percent in the July-September quarter, a gain that would be only a small improvement from the 1.7 percent GDP growth turned in during the April-June quarter.

The concern is that the economy is growing too slowly to make much of a dent in an unemployment rate that is currently stuck at 9.6 percent in September.

Orders in the volatile category of commercial aircraft had fallen 40.2 percent in August after having surged in July. Analysts were looking for another big gain in August reflecting reports from Boeing that it had received orders for 117 plans in August, compared to orders for just 10 aircraft in July.

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But outside of aircraft, factories likely saw more modest gains, boosted by continued strength in many overseas markets, particularly in developing nations.

Peoria, Ill.-based Caterpillar, the world's largest maker of mining and construction equipment, reported last week that its quarterly earnings showed another impressive gain. The company said it earned $792 million in the third quarter, a gain of 96 percent compared to the third quarter in 2009, a period when sales were depressed as the global economy struggled to emerge from a severe recession.

Caterpillar said its revenue nearly doubled in Latin America in the third quarter, was up 55 percent in North America and grew 51 percent in Asia. The slowest of Caterpillar's regions was the area that covered Europe, Africa and the Middle East, which saw a revenue gain of 31 percent.