LITTLE ROCK — Orders for U.S. durable goods other than transportation gear rose in September by the most in six months.
Demand for goods meant to last at least three years, excluding airplanes and automobiles, climbed 1.7 percent, the Commerce Department said Wednesday. Another report from the department showed purchases of new homes rose more than forecast.
A government tax break aimed at spurring business investment coupled with a 14 percent drop in the value of the dollar since June 2010 that is propelling American exports to record levels may continue to drive sales at manufacturers such as Caterpillar Inc. A report today is expected to show gross domestic product expanded at a 2.5 percent annual pace in the third quarter, the most in a year.
“The manufacturing sector remains healthy,” said Neil Dutta, an economist at Bank of America Corp. in New York. “This story will continue because of a weak dollar, lots of cash and low financing costs, the combination of which makes it more attractive for businesses to expand through stronger investment. [Today’s] GDP number will get a strong contribution from capital spending and trade.”
Stocks gained after the report and as Germany’s lower house of parliament approved plans to enhance the European bailout fund. The Dow Jones industrial average gained 162.42 points, or 1.4 percent, to 11,869.04.
Total bookings for durable goods fell 0.8 percent, depressed by a 26 percent drop in demand for aircraft that followed a 25 percent jump the prior month.
The median forecast of 79 economists surveyed by Bloomberg News projected a 1 percent decrease in total orders after a 0.1 percent decline in August. Estimates ranged from a drop of 2.5 percent to a gain of 1 percent.
Excluding transportation equipment, bookings were projected to rise 0.4 percent, according to the survey median.
The biggest drop in prices in more than two years helped sales of new houses climb 5.7 percent to a 313,000-unit annual pace, the most in five months, other figures from the Commerce Department showed.
The median price decreased 10 percent to $204,400 in September from $228,000 in the same month last year. The percentage drop was the biggest since April 2009.
The increase in sales was paced by rising demand in the West and South, while other parts of the country slumped, showing an uneven market that is weighed down by competition from a glut of distressed, previously owned houses. Last month’s sales pace was weaker than the 323,000 new homes sold in all of 2010, the worst annual performance in records dating to 1963.
Housing is “likely to remain in the doldrums until the overhang of existing homes is worked down,” John Ryding, chief economist at RDQ Economics in New York, said in a note to clients. “We do not see housing making a meaningful contribution to growth over the next year.”
The manufacturing report showed orders for non-defense capital goods excluding aircraft, a proxy for business investment in items such as computers and engines, climbed 2.4 percent, the most since March.
Information for this article was contributed by Bob Willis and Chris Middleton of Bloomberg News.
Business, Pages 25 on 10/27/2011