US durable orders up on transport, otherwise weak

New orders for US-made durable goods rose 2.6 per cent in February, twice forecasts, government data showed, but a drop in demand outside transportation hinted at weakness in business spending plans.

The Commerce Department said new orders for durable goods outside of the volatile transportation sector fell 1.3 per cent, well below Wall Street forecasts for a 0.9 per cent rise. Transportation orders surged 13.4 per cent.

In addition, orders for non-defence capital goods excluding aircraft, a proxy for business spending, dropped 2.3 per cent after a scant 0.3 per cent rise in January. Wall Street analysts had expected a one per cent increase.

US Treasury prices rose on the weaker-than-expected data and the dollar fell, but analysts said the impact of the report on financial markets may only be temporary.

"The durables ex-transportation was a pretty lousy number," said John Beerling, regional foreign exchange trading desk manager at Wells Fargo in Minneapolis.

"Overall I think it is a relatively negative report but I don't think it will have lasting effects because it is a highly volatile number, and we are more focused on the new home sales which is coming out in an hour or so," he added.

The durables report showed orders for non-defence aircraft climbed 52.5 per cent after a 70.1 per cent drop in January, powering the transportation sector higher.

The Commerce Department revised up January orders for durable goods - expensive items meant to last at least three years - though the drop remained steep. Durable goods orders fell 8.9 in January rather than the 9.9 per cent previously reported, the department said.

Durables orders excluding defence items rose just 0.3 per cent, short of the 0.8 per cent increase expected by economists. Orders for defense capital goods surged 104.1 per cent, the largest increase in four years.

Weakness was widespread outside of civilian aircraft and defence. Primary metals orders fell 2.5 per cent, fabricated metals dropped 1.9 per cent, machinery orders plunged 6.3 per cent and electrical equipment and appliance orders fell 3.2 per cent. Orders for motor vehicles fell 3.3 per cent.

Orders for computers and electronic products were a bright spot, rising 4.2 per cent. Computer orders alone rose 4.8 per cent.

Durable goods inventories fell 0.5 per cent in February, the largest one-month decline since November 2003.