US factory orders that signal investment surge

The Commerce Department said Wednesday that orders for so-called core capital goods, which also include equipment and computers, rose 7.2 percent from December. It was the biggest gain in more than a year and higher than the initial 6.3 percent increase estimated by the government last week.

Total factory orders fell 2 percent in January from December. But the decline was mostly due to a steep drop in volatile aircraft and defense orders that was also reported last week.

Commercial aircraft orders plummeted 34 percent in January, while demand for military aircraft plunged 63.8 percent. Excluding the weakness in transportation, total orders would have risen 1.3 percent in January.

Demand for durable goods, items expected to last at least three years, dropped 4.9 percent. Demand for nondurable goods, such as chemicals and paper, rose 0.6 percent.

Economists pay close attention to core capital goods because they are a good measure of business investment plans. The category excludes aircraft and military orders, which can fluctuate sharply from month to month.

Peter Newland, an economist at Barclays, said the gains in core capital goods, as well as stronger restocking by manufacturers in January, prompted Barclays' economists to boost their economic growth estimate for the January-March quarter

Newland said they now expect growth at an annual rate of 1.8 percent. That's up from their initial forecast of 1.4 percent and much higher than the 0.1 percent growth rate reported for the October-December quarter.