Military spending boosts big-ticket orders

Surprise September increase in government report attributed to defense.

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By Lara Moscrip, CNNMoney.com contributing writer

NEW YORK (CNNMoney.com) -- New orders for manufactured big-ticket items rose in September, the government said Wednesday, but much of the growth has been attributed to defense spending.

The U.S. Census Bureau said new orders for durable goods rose 0.8% to $207.8 billion. The surprise gain marks the fourth increase in the last five months, following a revised 5.5% drop in August.

Economists surveyed by Briefing.com expected a 1% decline in big-ticket new orders.

The report shows that the private sector is weak and military spending accounts for the overall gain in new orders for long-lasting goods, according to Bob Brusca, economist at FAO Economics.

"The military sector is behind any strength in the economy, and it's not a good sign, because it doesn't drive growth," Brusca said.

Defense new orders for capital goods increased 19.6% to $11.8 billion. There was an 8.4% increase in August, and in July, the category fell by 19.6%.

Nondefense new orders for capital goods in September increased 0.8% to $69.3 billion.

Excluding defense, new orders decreased 0.6%. Excluding transportation, new orders decreased 1.1%.

Shipments of manufactured durable goods increased 0.2% to $208.8 billion, following a 4.2% decrease in August.

A surge in unfilled orders for manufactured goods is a relative bright spot in the report, Brusca said. That number increased 0.4% to $829.6 billion, the highest level for that report since reports began in 1992, and follows a 0.3% increase in August.

There were also increases in new orders of electrical equipment and transportation equipment.

Inventories of manufactured durable goods in September increased 0.4% to $340.2 billion, also at its highest level since the report started, after being up 0.8% in August.

There can be a benefit to having stockpiles, which indicates work in the pipeline, but if they become too great, it may become necessary to cut production to decrease inventory.

That can start a vicious cycle of cutbacks to hours offered to employees, which results in declining incomes and lowered consumer spending, Brusca said. To top of page

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