U.S. Durable Goods Orders Jump 3.5% In November, Much More Than Expected

(RTTNews) - New orders for U.S. manufactured durable goods rose by much more than expected in the month of November, according to a report released by the Commerce Department on Tuesday, with the increase partly reflecting a rebound in orders for transportation equipment.

The report said durable goods orders surged up by 3.5 percent in November following a revised 0.7 percent decrease in October.

Economists had expected orders to increase by about 2.0 percent compared to the 1.6 percent drop that had been reported for the previous month.

The jump in durable goods orders was partly due to the substantial rebound in orders for transportation equipment, which shot up by 8.4 percent in November after tumbling by 3.5 percent in October.

Orders for non-defense aircraft and parts soared by 21.8 percent, while orders for defense aircraft and parts advanced by 10.1 percent and orders for motor vehicles and parts rose by 3.3 percent.

Excluding orders for transportation equipment, durable goods orders still rose by 1.2 percent in November compared to a revised 0.7 percent increase in October. Economists had expected another 0.7 percent increase.

The report showed a notable increase in orders for machinery, which surged up by 3.8 percent. Orders for computers and electronic products also rose by 1.7 percent.

Additionally, the Commerce Department's reading on futures business spending showed a significant rebound following recent weakness.

Orders for non-defense capital goods excluding aircraft jumped 4.5 percent in November following a 0.7 percent drop in October.

Shipments of non-defense capital goods excluding aircraft, which get plugged into GDP, also rose by 2.8 percent after dipping by 0.4 percent in the previous month.

"Bottom line, the cap ex spend in November was solid and has been the key missing piece to the economic recovery," said Peter Boockvar, managing director at the Lindsey Group. "Hopefully this continues into 2014."

"The one caveat however and something we have to watch for in January and February is that two key tax benefits are set to expire on December 31st and that possibility may have triggered the big jump in November as companies scramble to take advantage of them," he added.

Boockvar noted that the tax credit for investing in R&D and the bonus depreciation tax credit that allows companies to write off 50 percent of equipment purchases expire at the end of the year.