A smaller-than-expected increase in durable goods orders prompted little alarm Tuesday and was more than offset by a rise in consumer confidence.
Durable goods orders rose 0.8% in September, below the consensus estimate of 1%. But economists weren't too concerned, noting that the August data were revised up to show a 0.1% decline from a 1.1% loss. Taken together, orders have been better than expected over the past two months.
A 26.7% plunge in defense orders put pressure on the overall number. Excluding defense goods, orders rose 2.6%, the best reading since June. Orders from the Pentagon jumped 35.9% in August.
Orders for core capital investment goods, which exclude aircraft and defense goods and are considered a good gauge of business activity, rose 3.9% last month, the biggest increase since 5.1% in March. Core orders have climbed 13.5% over the past year, the best performance since the summer of 2000.
Orders for computer and electronic products, which have been up for five straight months, rose 2.6%. Durable goods orders for 2003 are running 0.5% above last year's level.
In a separate report, consumer confidence rose to 81.1 in October from a revised 77.0 in September. Economists had been expecting a reading of 79.3.
After declining for five straight months, the present situation index increased to 66.8 from 59.7. The expectation index rose to 90.7 from 88.5 in September. "A more favorable job market was a major factor in the turnaround. And, the belief that this trend will continue has boosted expectations," said Lynn Franco, director of The Conference Board's Consumer Research Center.
Those anticipating more jobs to become available in the next six months increased to 19.7% from 16.6%. Those expecting fewer jobs to become available decreased to 20.8% from 21.1%. "With the holiday season around the corner, this improvement in consumers' spirits is a good omen for upcoming retail sales," Franco said.