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From:	Millie (75.107.206.117)
Subject:	Factory Orders in U.S. Increase More Than Forecast
Date:	January 5, 2010 at 3:01 pm PST

an. 5 (Bloomberg) -- Factory orders in the U.S. rose in November more than twice as much as anticipated, led by gains in demand for business equipment that indicate companies are boosting spending and production.

Demand has increased against a backdrop of record inventory reduction during the first nine months of 2009, spurring production at the nation’s factories. The acceleration that led the economy out of the worst recession since the 1930s may soon be accompanied by hiring and more corporate investment.

“Production is catching up to sales as firms don’t feel the need to cut inventories further,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York who forecast a 1 percent gain in factory orders. “That’s one of the significant reasons for the acceleration in manufacturing activity.”

The number of contracts to buy previously owned U.S. homes plunged 16 percent in November, more than forecast, as Americans waited for a first-time buyer tax credit to be extended, according to figures from the National Association of Realtors issued today in Washington. It was the first decrease in 10 months.

Stocks trimmed earlier losses following the reports. The Standard & Poor’s 500 Index was up 0.2 percent to 1,135.61 at 10:43 a.m. in New York. Treasury securities rose.

The median estimate of economists surveyed was based on 58 projections. The Commerce Department revised the October advance in bookings up to 0.8 percent from a previously reported 0.6 percent. Estimates range from a drop of 1 percent to an increase of 1.5 percent.

Measures of business investment from the durable goods report issued last month were also marked higher.

Excluding transportation demand, which tends to be volatile, orders climbed 1.9 percent, the biggest gain since June.

Durable Goods

Demand for durable goods, those made to last several years, 0.2 percent in November.

Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, increased 3.6 percent, up from the previously reported 2.9 percent increase. Shipments of those goods, used to calculate gross domestic product, climbed 1.1 percent, compared with 0.8 percent reported earlier.

Orders for non-durable goods, which include food, petroleum and chemicals, increased 1.8 percent in November after a 2.2 percent increase a month earlier.

The gain in non-durable orders may reflect higher prices for petroleum. The average cost of a barrel of crude oil traded on the New York Mercantile Exchange rose to $78.15 in November, compared with $75.82 in October.

Demand fro computers and electronic products increased 4.9 percent, the most since February, signaling companies may be gaining confidence in the recovery.

Business Investment

Corporate investment in equipment rose at a 1.5 percent annual rate from July through September, the first increase since the final three months of 2007, the Commerce Department’s final report on third-quarter gross domestic product showed Dec. 22. The economy grew at a 2.2 percent annual pace in the third quarter.

Today’s report showed factory inventories rose 0.2 percent. Manufacturers had enough goods on hand to last 1.32 months at the current sales pace, the fewest since September 2008.

Other reports showed manufacturing continued to expand at the end of 2009. The Institute for Supply Management’s national factory gauge climbed to 55.9 in December, the highest reading since April 2006, the group said yesterday.

Recalling Workers

Caterpillar Inc., the world’s largest maker of bulldozers and excavators, will bring back some laid-off workers in this year as sales improve, Chief Executive Officer Jim Owens said in a Dec. 11 Bloomberg Television interview.

“We’ll gradually begin to call people back and to rebuild our overall sales and ability to ship product,” Owens said in a Dec. 11 interview with Bloomberg Television. “I think it will gradually begin to pick up as 2010 unfolds.”

Caterpillar cut about 18,700 full-time jobs and about the same number of temporary workers since December 2008 as the global recession reduced demand. The Peoria, Illinois-based company predicts 2010 sales will increase as much as 25 percent from the midpoint of the 2009 forecast range.

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