Orders for U.S. durable goods jumped in July by the most on record as bookings surged for commercial aircraft and revisions showed a bigger advance the prior month.
Bookings for goods meant to last at least three years surged 22.6 per cent after climbing a revised 2.7 per cent in June, the Commerce Department said today in Washington. A U.K. air show helped spark a 318 per cent jump in plane orders, the most since January 2011.
Prospects that demand will be sustained are giving companies reason to make larger investments in their operations. Persistent job growth that keeps households spending, along with a pickup in overseas markets, would help provide an added boost for manufacturers.
"When you get past the volatility of the aircraft, what you're seeing is continued firming in core business spending," said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. "The underlying trend here is ongoing moderate pace" of capital investment, he said.
Another report showed home-price gains are decelerating. The S&P/Case-Shiller index of property values in 20 cities increased 8.1 per cent in June from a year earlier, the smallest 12-month advance since January 2013, the group reported.
The median forecast of 78 economists surveyed by Bloomberg estimated durable goods orders would climb 8 per cent. June orders rose a revised 2.7 per cent. Estimates ranged from a 0.5 per cent gain to a 38.1 per cent surge after a previously reported June increase of 1.7 per cent.
Stock-index futures held gains after the figures, with the contract on the Standard & Poor's 500 Index expiring in September rising 0.1 per cent to 1,997.4 at 9:20 a.m. in New York.
The July gain in durables orders also reflected increased demand for automobiles. Bookings for motor vehicles climbed by the most since August 2009.
A boost in transactions for aircraft helped lift the overall goods figure. Boeing Co., the Chicago-based aerospace company, said it received 324 orders for planes last month, almost three times the 109 tally in June. The company's reported deals picked up at the Farnborough Air Show in England last month.
Orders excluding transportation equipment decreased 0.8 per cent in July after a 3 per cent increase a month earlier.
Orders for non-military capital goods excluding aircraft, a proxy for future business investment, fell 0.5 per cent last month after a revised June jump of 5.4 per cent that was the strongest since November. The June gain was previously reported as 1.4 per cent.
Non-military capital goods excluding aircraft orders were projected to rise 0.2 per cent.
Shipments of such goods, used in calculating gross domestic product, increased 1.5 per cent in July after rising 0.9 per cent the prior month, today's report showed. The June reading had previously been reported as a decline.
The data corroborate other surveys indicating factory activity has gained traction in recent months. The Institute for Supply Management's index climbed in July to its strongest level since April 2011.
Business investment in equipment climbed at a 7 per cent annualized rate in the second quarter, rebounding from a 1 per cent annualized decline in the first three months of the year, according to the Commerce Department's report on gross domestic product.
Motor vehicle assembly lines are humming as demand lingers near an eight-year high. Cars and light trucks sold at a 16.4 million pace in July, down from the 16.9 million the prior month that was the fastest rate since July 2006.
Some manufacturers are also getting a boost as housing shows uneven progress in rebounding from a slowdown earlier this year. Sales of previously owned homes rose last month at their strongest pace since September, according to data from the National Association of Realtors last week.
Whirlpool Corp., a Benton Harbor, Michigan-based appliance maker, is among companies expecting demand to improve the rest of this year after a weak, winter-depressed start to 2014.
"Macroeconomic indicators point to a strong second half as we're seeing the lowest unemployment rate since September 2008," Marc Bitzer, president of Whirlpool's North America unit, said on a July 23 earnings call. "Strong replacement demand will continue as consumers replace older appliances."
Home Depot Inc., the largest U.S. home-improvement retailer, is benefiting from a jump in demand for appliances.
"The housing market remains a modest tailwind for our business," Chief Executive Officer Francis Blake said on an Aug. 19 earnings call. "We saw an acceleration of big-ticket transactions" in the second quarter, supporting "a continuing recovery in the U.S. home-improvement market."
Monthly job gains that are on pace for their best year since 1999 will provide the wherewithal for increased consumer spending. Employers have added an average 230,000 to payrolls a month so far this year. Economists forecast an average 220,000 jobs on average will be added through year-end, according to the median in a Bloomberg survey conducted Aug. 8-13.