REUTERS - New orders for
U.S.-made capital goods rose more than expected in November amid strong demand
for machinery and primary metals, suggesting some of
the oil-related drag on
manufacturing was starting to fade.
Other data on
Thursday showed the economy grew faster than previously estimated in the third
quarter, notching its quickest pace in two years. And while the number of
Americans applying for unemployment aid hit a six-month high last week, it
remained below a level that is associated with labor market strength.
The Commerce
Department said non-defense capital goods orders excluding aircraft, a closely
watched proxy for business spending plans, increased 0.9 percent after gaining
0.2 percent in October.
There were increases
in orders for electrical equipment, appliances and components, as well as
computers and electronic products. Economists polled by Reuters had forecast
these so-called core capital goods rising only 0.3 percent in November.
The dollar initially
rose against a basket of currencies on the data, but later gave up gains to
trade flat. Prices for U.S. government bonds slipped, while U.S. stock index
futures rose.
A collapse in oil
prices last year, together with a surge in the dollar, pressured manufacturing.
Much of the impact has been through weak business spending on equipment, which
has contracted for four consecutive quarters.
But with oil prices
hovering above $50 per barrel, manufacturing, which accounts for 12 percent of
the U.S. economy, is starting to perk up. Gas and oil well drilling has risen
over the last several months.
Economists expect
business spending to rebound in 2017, driven in part by president-elect Donald
Trump's perceived business-friendly policies.
The incoming Trump
administration has promised to slash taxes, remove some regulations and
increase infrastructure spending. But manufacturing gains are likely to be
limited by renewed dollar strength in the wake of Trump's victory.
Since Trump's Nov.8
election victory, the dollar has increased 4.4 percent against the currencies
of the United States' main trading partner on concerns that the business
mogul's policy agenda could fan inflation.
GDP REVISED HIGHER
Last month,
shipments of core capital goods rose 0.2 percent after falling 0.3 percent in
October. Core capital goods shipments are used to calculate equipment spending
in the government's gross domestic product measurement.
In another report,
the Commerce Department said GDP increased at a 3.5 percent annual rate in the
third quarter instead of the previously reported 3.2 percent pace. That was the
strongest growth rate since the third quarter of 2014 and followed the second
quarter's anemic 1.4 percent pace.
The upward revision
reflected stronger growth in consumer spending, business investment in
structures and intellectual property products than previously estimated,
underscoring the economy's solid fundamentals, which contributed to the Federal
Reserve raising interest rates last week.
The U.S. central
bank lifted its benchmark overnight interest rate by 25 basis points to a range
of 0.50 percent to 0.75 percent, also encouraged by a sturdy labor market. The
Fed forecast three rate hikes in 2017.
A third report from
the Labor Department showed initial claims for state unemployment benefits
increased 21,000 to a seasonally adjusted 275,000 for the week ended Dec. 17,
the highest since June.
Despite the
increase, it was the 94th straight week that claims were below 300,000, a
threshold associated with a healthy labor market. That is the longest stretch
since 1970, when the labor market was much smaller. The labor market is viewed
as being at or near full employment.
Claims tend to be
volatile around this time of the year because of different timings of the
various holidays. The four-week moving average of claims, considered a better
measure of labor market trends as it irons out week-to-week volatility,
increased 6,000 to 263,750 last week.
REUTERS
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