Durable Goods Orders Unexpectedly Strong in January

WASHINGTON – U.S. manufacturers kicked off the new year on an unexpectedly strong note, as January orders for durable goods posted the biggest monthly jump since July, the government said in a report Thursday.

The Commerce Department said new orders for durable goods -- those meant to last three or more years - advanced 3.3 percent in the month. December durable goods orders were revised to a 0.4 percent decline from the previously reported 0.2 percent drop.

While the January gain was boosted by a sharp increase in transportation-related orders, the report showed broad strength in various tegories of durable goods. Motor vehicle orders rose 10.7 percent, the biggest gain since April 2002.

Wall Street analysts had been anticipating a smaller rebound from December's weakness. In a poll of analysts by Reuters, the average forecast called for a 1.3 percent gain in orders.

The stock market was expected to open higher after the report, traders said.

"The capital goods sector has got some life in it," said Carey Leahey, economist at Deutsche Bank Securities in New York.

The Commerce report was the latest in a string of recent measures hinting at a possible revival in the manufacturing sector after a brutal slump in recent years as the economy slowed.

A widely watched monthly index tracking factory activity compiled by the Institute for Supply Management has been above 50 for three straight months, indicating expansion. Similarly, the Federal Reserve said industrial production in January rose a stronger-than-expected 0.7 percent in January.

Still, strength in the sector remains somewhat spotty and manufacturing continues to shed jobs, losing 16,000 in January, according to the Labor Department.

Businesses appear hesitant to invest in new plants and equipment with the uncertainty of possible war with Iraq looming. But Federal Reserve Chairman Alan Greenspan told a Senate Committee earlier this month that those worries may be short-lived and the economy could rebound once they are resolved.

Within the Commerce report, primary metals orders gained 4.2 percent, the sector's biggest rise since the spring of 2002. Orders for computer and electronic products rose 3.2 percent, their second straight monthly rise.

Inventories of durable goods dropped in January, falling 0.1 percent. The drop, on the heels of December's 0.9 percent gain, was the 23rd monthly fall in two years.

Non-defense capital goods orders, excluding aircraft, were up 5.4 percent. The gauge is seen by some economists as a proxy for business capital investment.