Durable goods orders up, but core demand is weak

[December 23, 2011]  WASHINGTON (AP) -- Companies' demand for long-lasting manufactured goods rose by the largest amount in four months in November, driven by a jump in orders for planes.

The Commerce Department says orders to U.S. factories for durable goods rose 3.8 percent in November. It was the biggest gain since July. But so-called core capital goods, a proxy for business investment spending, dropped for a second straight month. They fell 1.2 percent.

The declines in business capital goods excluding aircraft raise doubts about a pocket of strength for the economy this year. Business investment spending has surged as companies stepped up orders to take advantage of tax breaks that are set to expire at year's end.

Manufacturing has been a bright spot for the economy. U.S. factory activity has been lifted by a surge in exports. But some economists are concerned that Europe's debt crisis will push that region into a recession, cutting demand in a market that accounts for about one-fifth of U.S. exports.

For November, orders in the transportation category rose nearly 15 percent. That reflected a 73 percent jump in demand for commercial aircraft after two straight declines. Orders for military aircraft rose. But demand for motor vehicles and parts edged down after a surge in October.

Excluding the volatile transportation sector, orders would have risen a more modest 0.3 percent in November, the third straight decline.

Factories that make primary metals such as steel reported a strong 5.2 percent increase in demand in November. And for heavy machinery manufacturers, orders increased 0.9 percent. But demand for electronics products and communication equipment declined last month.

Earlier this month, the Institute for Supply Management said its manufacturing index rose to 52.7 in November, up from 50.8 in October. Any reading above 50 indicates expansion. The November performance marked the 28th straight month of growth in the manufacturing sector.

Factory output had slowed in the spring, reflecting supply disruptions caused by the March natural disasters in Japan. With production recovering in Japan, supplies of automotive and electronic parts are now flowing more freely. U.S. factories have been able to resume more normal production after slowdowns earlier in the year

[Associated Press; By MARTIN CRUTSINGER]

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