U.S. business spending rises for third month, boosting factories

Jan. 27, 2017 – U.S. businesses ramped up their investment in industrial machinery, semiconductors and other big-ticket items last month, boosting demand for factory goods.

A measure that tracks business spending plans climbed 0.8 per cent in December, after jumping 1.5 per cent the previous month, the Commerce Department said Friday.

Orders for all durable goods, which are meant to last longer than three years, slipped 0.4 per cent, mostly because of a sharp fall in demand for defence aircraft, a volatile category. Excluding transportation-related goods, orders rose 0.5 per cent, the sixth straight increase.

The report adds to recent evidence that manufacturers are climbing out of a roughly two-year rut. A strong U.S. dollar and falling oil and gas prices had sliced demand for factory products, as drillers ordered less steel pipe and other equipment. Yet demand has risen since oil prices have stabilized.

Orders for industrial machinery rose 0.4 per cent last month, while demand for computers, semiconductors and electronic goods jumped 2.4 per cent. Orders for autos climbed 2 per cent, a sign automakers expect additional sales growth.

Other measures of the U.S. manufacturing sector have also improved. A private survey earlier this month found that manufacturing activity in December rose to its highest level in two years, led higher by strong increases in new orders and production.

And manufacturing output rose 0.2 per cent in December, according to a report from the Federal Reserve. Auto sales reached a record level in 2016, and automakers continued cranking out vehicles through the end of the year.

Still, manufacturing has not yet fully rebounded. Manufacturing output rose just 0.2 per cent in all of 2016, according to the Fed.

And business investment in long-lasting goods fell 3.4 per cent last year, despite the gains of the last three months.