Durable Goods Orders Mixed, Jobless Claims Rise

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Inside a Best Buy Store Ahead Of Durable Good Orders Data
Tim Boyle/Bloomberg via Getty Images
By Lucia Mutikani

WASHINGTON -- Orders for long-lasting U.S. manufactured goods excluding transportation unexpectedly rose last month as did a gauge of business spending plans, but that will probably not change views that factory activity is slowing.

Other data Thursday showed an unexpected increase in the number of Americans filing new applications for unemployment benefits last week. The run-up in claims, however, likely doesn't signal a fundamental shift in labor market conditions.

The Commerce Department said durable goods orders excluding transportation rose 1.1 percent, the largest increase since May, after falling 1.9 percent in December.

Economists polled by Reuters had expected this category to fall 0.3 percent after a previously reported 1.3 percent decline in December. Durable goods are items from toasters to aircraft meant to last three years or more.

U.S. stock index futures turned positive on the data. Prices for U.S. Treasury debt were little changed.

The increase last month reflected a surge in orders for computers and electronic products, fabricated metal products and defense capital goods.

Outside these three components, details of the report were weak, with declines in orders for machinery, primary metals, electrical equipment, appliances and components, and transportation equipment.

Data such as industrial production and regional factory surveys have suggested that manufacturing hit a soft patch in recent months.

Part of the slowdown reflects unusually cold weather that has disrupted activity. %VIRTUAL-article-sponsoredlinks%Manufacturing is also cooling as businesses work through a massive stock of unsold goods that was accumulated in the second half of 2013.

As result, they are placing fewer orders with manufacturers, holding back factory production. In January, shipments of durable goods fell for a second straight month and inventories rose 0.3 percent after increasing 0.9 percent in December.

A plunge in aircraft orders at Boeing and a drop in motor vehicles orders saw orders for transportation equipment falling 5.6 percent in January. It was the second straight month of declines in this volatile component.

Boeing (BA) reported on its website it received orders for only 38 aircraft last month, sharply down from 319 planes in December.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.7 percent after dropping by a revised 1.8 percent in December.

Economists had expected orders for these so-called core capital goods to slip 0.5 percent last month after a previously reported 0.6 percent fall in December.

Shipments of core capital goods, which are used to calculate equipment spending in the government's measure of gross domestic product, fell 0.8 percent last month.

December's shipments were revised to show a 0.3 percent increase instead of the previously reported 0.6 percent rise.

Economists attributed the gain in December to businesses pushing through spending before the year-end expiration of tax incentives.

In a separate report, the Labor Department said initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 348,000. Claims for the prior week were revised to show 2,000 fewer applications received than previously reported.

Economists polled by Reuters had forecast first-time applications for jobless benefits slipping to 335,000 in the week ended Feb. 22, which included the Presidents Day holiday.

While last week's increase pushed them to the upper end of their range so far this year, it probably doesn't signal labor market weakness as claims tend to be volatile around federal holidays.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, was unchanged at 338,250.

An unusually cold winter has clouded the labor market picture, with job growth braking sharply in December and recovering only marginally in January.

A third month of weak hiring is expected after snowstorms slammed the densely populated regions of the country during the survey week for February nonfarm payrolls.

The claims report showed the number of people still receiving benefits after an initial week of aid rose 8,000 to 2.96 million in the week ended Feb. 15.

The so-called continuing claims have been elevated in recent weeks and some economists say the cold weather could be preventing many recipients from going out to search for work and companies to delay hiring.

Durable Goods Orders Mixed, Jobless Claims Rise
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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