WASHINGTON: A gauge of planned United States business spending increased by the most in just over a year in January, a sign businesses were becoming more confident in the durability of the economic recovery, Reuters reported on Wednesday.
The case for the economy’s resilience was bolstered by another report on Wednesday showing that contracts to buy previously owned homes approached a near three-year high last month. Housing is expected to underpin growth this year.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, jumped 6.3 per cent, the biggest gain since December 2011. Orders for the so-called core capital had slipped 0.3 per cent in December.
“The strong gains in core capital goods orders suggest that business investment activity, which has been one of the sour points of this economic recovery, could provide a meaningful lift to overall economic activity this quarter,” said Millan Mulraine, a senior economist at TD Securities in New York.
Economists had expected core capital goods orders to only rise 0.2 per cent. Business spending regained its footing in the fourth quarter after contracting in the prior period.
In a separate report, the National Association of Realtors said its pending home sales index increased 4.5 per cent to its highest level since April 2010 – just before the expiration of the home-buyer tax credit.
The rise in signed contracts, which become sales after a month or two, added to data such as building permits and home prices that have suggested a decisive turnaround in the housing market.
The sector is no longer a drag on the economy and home building added to economic growth last year for the first time since 2005.
Still, the reports are unlikely to change the Federal Reserve’s very easy monetary policy stance.
Stocks on Wall Street were trading higher on the data. Prices for US government debt were mixed, while the dollar was weak against a basket of currencies.
The Commerce Department report also showed durable goods orders excluding transportation increased 1.9 per cent last, the largest gain since December 2011, after increasing 1 percent in December.
That was well above economists’ expectations for a 0.2 per cent increase.
However, overall orders for durable goods – items from toasters to aircraft that are meant to last at least three years – tumbled 5.2 percent as demand for civilian and defense aircraft fell sharply. Last month’s drop was the first since August.
Factory activity has cooled in recent months after helping to lift the economy from the 2007-09 recession. Sluggish domestic demand, tighter fiscal policy and slowing global growth are holding back manufacturing.
