U.S. durable goods weaker than expected in November

By Alister Bull

WASHINGTON (Reuters) - Weak durable goods orders in November fueled concern on Thursday over the resilience of the U.S. economy to the country's steep housing slump.

Jobless claims also jumped last week, in a possible sign of mounting pressure on the labor market. However, a measure of consumer confidence improved somewhat this month.

Investors focused more on the Commerce Department report showing new orders up by a much less-than-forecast 0.1 percent in November, while a key gauge of corporate appetite for investment had also unexpectedly shrank.

The dollar softened and U.S. government bonds rallied on the data as investors bet on weaker U.S. growth ahead.

"The (orders) report does reinforce the notion that there's less demand for durable goods ... (it) suggests a weak print for fourth-quarter" gross domestic product, said Joseph Brusuelas, chief US economist at IDEAglobal in New York.

News Pakistani opposition leader Benazir Bhutto had been assassinated was reported at roughly the same time as orders, adding additional concerns about global stability.

The 10-year U.S. Treasury notes were 23/32 higher in price for a yield of 4.19 percent in late New York trade. The dollar retreated to 1.4610 against the euro from a session low of 1.4470. Stocks also slipped, with the Dow Jones Industrial Average .DJI ending off 192 points at 13,359.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, declined 0.4 percent after falling 2.9 percent in October, Commerce said, pointing to cooler fourth-quarter economic activity.

"Two monthly declines in a row for 'core' capital goods orders suggest increased caution among businesses as financial conditions tighten and the economy slows," said Nigel Gault, U.S. economist at Global Insight.

FED CUT

Investors expect the U.S. Federal Reserve to respond to the slowdown by lowering borrower costs again at its next policy meeting on January 29-30. Interest rate futures markets implied an 84 percent likelihood of a quarter point cut versus a 72 percent likelihood on Wednesday.

Analysts polled by Reuters had expected a 0.5 percent November increase for non-defense capital goods orders excluding aircraft. They had projected a 2.0 percent jump in overall orders in November from a revised 0.4 percent fall the month before.

It was the first monthly increase in overall orders since July, the Commerce Department said, but orders excluding transportation shrank 0.7 percent in November.

"The sluggish demand for durable goods during November indicates that business confidence in the economy continues to be adversely impacted by the deep housing downturn," said Clifford Waldman, Economist for the Manufacturers Alliance/MAPI, who also cited the credit crunch as a headwind.

Total inventories of durable goods rose 0.8 percent last month, the strongest gain since October 2006, the department said. Inventory build up can signal the anticipation of stronger sales ahead, but it may also have been unintended after sales came in weaker than hoped during the period.