U.S. Durable Goods Orders Rose for Third Straight Month

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Durable goods orders rose a seasonally-adjusted 0.5% in February, the U.S. Commerce Department announced Wednesday. It's the forward-looking indicator's third straight monthly rise, and more evidence that the nation's manufacturing sector is continuing to recover.

Further, January's orders were revised up to 3.9% from the previously-estimated 2.6% gain. Also, excluding the often-volatile transportation component, the core rate rose 0.9% in February after falling 0.6% in January.

Economists surveyed by Bloomberg News had predicted February durable goods orders would rise by 1.0%.

Significantly, the durable goods three-month moving average now stands at a healthy 2.06%.

Capital Goods, Machinery Orders Rise

In February, orders for non-defense aircraft and parts surged 32.7%, capital goods increased 3.2%, machinery surged 4.7%, fabricated metals rose 1.9%, computers and electronics products orders declined 0.6%, manufacturing orders rose 0.9%, communications orders fell 1.7%, motor vehicle parts orders fell 1.9%, and transportation equipment fell 0.7%.

Also in February, shipments fell 0.4%; however, excluding the transportation component, shipments rose 0.4%. Inventories rose 0.3%.

Durable goods orders are new orders by stores and businesses for immediate and future delivery of factory hard goods. These orders measure how busy factories are likely to be in the months ahead for such items as refrigerators, washers and dryers, cars, computers, and industrial machinery.

Investors monitor the statistic because rising durable goods orders usually indicate that businesses are experiencing sustainable growth in demand, which usually translates into higher revenue and increased production by the manufacturing sector -- two bullish signs for the U.S. stock market.

The key take-away from the February report, ignoring the non-defense aircraft parts 32.7% surge, which is often a volatile category, concerns the continued, healthy increase in orders for machinery, fabricated metals, and manufacturing orders. The uptrend in all three suggests that the U.S. manufacturing recovery is continuing, with demand increasing. It's another encouraging sign for the U.S. economic expansion: Manufacturing will continue to add to U.S. GDP in 2010.
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