Demand for commercial aircraft lifted orders for big-ticket manufactured goods in September. However, excluding a surge in demand for transportation equipment, businesses spent less on product purchases that signal expansion.

New orders for manufactured durable goods rose 3.3 percent in September, marking the largest increase since January, according to the United States Department of Commerce this week. Excluding defense products, new orders increased 2.9 percent.

The total value of long-lasting U.S.-made goods increased $6.3 billion to $199.2 billion.

The overall increase in orders surpassed the expected 2 percent rise forecast by economists, according to Reuters. Up two of the last three months, September’s increase followed a 1 percent decrease in August.

Transportation equipment, also up two of the last three months, had the highest increase, due largely to non-defense aircraft and parts, which increased $6.6 billion.

“Civilian aircraft accounted for most of the increase in September. Aircraft orders rose 105 percent in September after a 30 percent decline in the prior month,” MarketWatch explains. “Boeing Co. reported strong orders in September compared with August.”

However, excluding the 15.7 percent rise in transportation orders, durable-goods orders fell 0.8 percent in September.

Spending by companies on capital goods excluding aircraft dropped 0.6 percent last month after rising 4.8 percent in August. This key indicator has declined in two of the past three months.

“Moreover, the drop in new orders for primary and fabricated metals, computer and electronic products as well as motor vehicles for the second time in the past three months is a concerning sign for manufacturers,” Dave Huether, the National Association of Manufacturers’ chief economist, writes at the association’s Shopfloor blog.

In September, orders for computers and electrical equipment fell but were offset by rising orders for machinery and electrical equipment. Orders for motor vehicles decreased 0.4 percent.

Meanwhile, durable-goods shipments fell 0.4 percent last month, and were down 0.4 percent excluding transportation goods. Inventories, up nine consecutive months, rose 0.5 percent in September.

“Manufacturers have been getting a boost from stronger overseas demand, which has helped to offset weakness in consumer spending in the U.S.,” the Associated Press notes.

“Outside of aircraft, the only silver lining in [yesterday's] report is that new orders for machinery rose for a second consecutive month in September,” Huether continues. “Since machinery is one of the most export-oriented manufacturing industries, this is encouraging news for the export recovery that has been slowing in recent months.”

Caterpillar, the world’s largest maker of mining and construction equipment, last week reported earnings of $792 million in the third quarter, a 96 percent gain over the same period in 2009. The company’s CEO, Doug Oberhelman, credited “continuing economic growth in the developing world” for the substantial improvement in sales.

Daniel J. Meckstroth, chief economist of the Manufacturers Alliance/MAPI, agrees that exports remain an important source of growth for manufacturing and the overall economy. “Strong export activity, aided by the declining dollar and, when accompanied by modest consumer spending growth, is enough to begin rebalancing the U.S. economy away from its excessive reliance on debt-based consumer spending and housing,” Meckstroth wrote in an analysis of the data.

The Commerce Department report suggests manufacturing continues to move forward, albeit at a slower pace than earlier this year.

“Order activity is never smooth and recent reports have shown a mixture where the gains exceed losses by a wide margin,” according to Meckstroth. “In the first nine months of this year, total durable goods orders are up 15 percent and non-defense capital goods orders excluding aircraft are 16.6 percent above the same period one year ago.”

Earlier

Durable Goods Orders Rise in January

U.S. Goods Orders Fall Slower than Expected

Resources

…Durable Goods Manufacturers’ Shipments, Inventories and Orders – September 2010
U.S. Department of Commerce, Oct. 27, 2010

Durable Orders Ex-Transportation Fall in September
by Lucia Mutikani
Reuters, Oct. 27, 2010

Durable-Goods Orders Jump 3.3% in September
by Greg Robb
MarketWatch, Oct. 27, 2010

Soaring Aircraft Orders Lift Manufacturing in September
by Dave Huether
Shopfloor.org (National Association of Manufacturers), Oct. 27, 2010

Durable Goods Orders Rise, Business Spending Cools
The Associated Press, Oct. 27, 2010

Caterpillar Third-Quarter Profit up 96 Percent, Sales and Revenues up 53 Percent
Caterpillar, Inc., Oct. 21, 2010

…Durable Goods Report: Equipment Spending Remains Important Source of Growth
by Daniel J. Meckstroth
Manufacturers Alliance/MAPI, Oct. 27, 2010