Durable Goods Orders Rise 3.3%

New orders for manufactured durable goods rise by a stronger-than expected 3.3% in September, after declining 1% in August.
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(Durable Goods article updated with analyst commentary.)

NEW YORK (

TheStreet

) -- New orders for manufactured durable goods rose by a stronger-than expected 3.3%, or $6.3 billion, in September to reach $199.2 billion. Consensus estimates expected durable goods orders to rise 1.8% after August turned in a 1% decline.

Excluding the more volatile transportation sector, however, durable goods orders dropped 0.8%, against estimates of a 0.2% increase.

Shipments of manufactured durable goods in September decreased $0.9 billion, or 0.4% to $197.4 billion, with computers and electronic products showing the largest decrease. It was the second consecutive month of decline.

Inventories of manufactured durable goods rose 0.5% to $314.7 billion, marking the ninth consecutive monthly increase.

Orders for nondefense capital goods rose by a solid 8.6% to $71.9 billion in September. Shipments of nondefense orders are considered a good proxy for producers' durable goods component of GDP -- the biggest indicator of business investment. Shipments decreased 0.8% while unfilled orders increased 1.5%.

Scott Brown, chief economist at Raymond James, said the report once again confirmed that the economy was going through a slow patch. "On a sector-wise breakdown there were more decreases than increases," he said. "The increase in unfilled orders is a positive. A decrease would have been a sign that economic activity would drop even further," he said.

The advance estimate for GDP growth in the third quarter will be released on Friday. The U.S. economy is expected to have grown 2%, according to consensus estimates.

Manufacturing has led the recovery out of the recession as strong demand from emerging markets has helped buoy export demand.

Shares of industrials such as

Caterpillar

(CAT) - Get Report

and

Honeywell

(HON) - Get Report

have outperformed in 2010, benefiting from foreign demand.

The rebound in profits should fuel business fixed investments. Businesses are still postponing fresh investments in technology and replacement demand is helping sustain the durable goods sector, according to Brown. Consumer spending is still lackluster and will not improve until job growth returns.

The

SPDR Industrials Sector

(XLI) - Get Report

shed 1.6% in forenoon trading.

-- Written by Shanthi Venkataraman in New York

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