NEW YORK (CNNfn) - Orders for durable goods from U.S. factories rose in December, a rise well above analysts' expectations and the largest increase since July.|
Meanwhile, jobless claims for the week ended Jan. 22 remained near generational lows, the Labor Department reported.
The Commerce Department reported that orders for durable goods surged 4.1 percent in December, well above the 0.6 percent gain expected by analysts and above November's revised 1 percent increase. December's increase was the largest since a 4.3 percent jump in July.
However, excluding transportation products, which tend to be volatile from month to month, orders advanced 0.7 percent after a 2.7 percent rise in November. Durable goods are items such as cars and dishwashers, designed to last three years or more.
For the 1999 year, durable orders rose 7.1 percent, double the 3.1-percent pace recorded in 1998, the Commerce Department said.
Volatile, but strong
Although considered volatile, the numbers were viewed by analysts and economists as more evidence that the robust U.S. economy is showing no signs of slowing as it barrels into its ninth and record year of uninterrupted expansion. And that pace of growth may lead the Federal Reserve to raise interest rates at its policy meeting next week, or possibly down the road.
"Increased demand in expanding economies abroad and continued robust conditions at home support the production outlook, given the low inventory environment," said Steven Wood, an economist with Banc of America Securities in San Francisco. "The Fed is sure to view the economy as expanding at too fast a pace now that manufacturing is coming back and consumption remains quite strong."
Most economists expect Fed policy makers to ratchet up rates another quarter point at its Feb. 1 to 2 meeting, to slow economic growth and ensure inflation remains in check. The Fed funds rate -- the minimum rate banks can charge each other for overnight loans -- currently rests at 5.5 percent. The rate sets the trend for consumer and business lending in the United States.
Bond investors, in particular, have already priced in the expected quarter-point increase, according to the implied yield on the Fed funds futures contract. The yield on the February contract -- which is an indicator of investor sentiment regarding where the Fed funds rate will be at the end of next month -- is 5.79 percent, a quarter-point higher than its current level. The April contract is currently at 5.98 percent.
Aircraft orders surge
December's durables figures reflected a 16.2 percent rise in transportation orders, including a 53.3 percent jump in orders for commercial aircraft. Orders for electronic goods gained 4.6 percent, while capital goods orders rose 3.2 percent. Orders for primary metals slipped 1.5 percent, while orders for industrial machinery declined 4.2 percent.
Even with the strong orders for aircraft equipment and other components, the numbers indicate the economy is running at an exceptionally strong pace, Robert Busca, chief economist with Ecobest Consulting, told CNNfn. (168KB WAV) (168KB AIFF)
Jobless claims low
Separately, the Labor Department reported that weekly jobless claims rose by 1,000 to 266,000 in the week ended Jan. 26, indicating the number of people needing social assistance due to lack of employment remains near a generational low. The four-week average of jobless claims slipped 288,000 from 290,050 in the prior week.
The Labor Department's quarterly tally on employment costs had been scheduled for release Thursday, but was postponed until Friday due to inclement weather in Washington earlier this week.