* So-called core capital goods orders surge 6.3 percent
* Durable goods orders ex-transportation up 1.9 percent
* Aircraft, defense capital goods orders tumble
* Pending home sales rise 4.5 percent in January
By Lucia Mutikani
WASHINGTON, Feb 27 A gauge of planned U.S.
business spending increased by the most in just over a year in
January, a sign businesses were becoming more confident in the
durability of the economic recovery.
The case for the economy's resilience was bolstered by
another report on Wednesday showing that contracts to buy
previously owned homes approached a near three-year high last
month. Housing is expected to underpin growth this year.
Non-defense capital goods orders excluding aircraft, a
closely watched proxy for business spending plans, jumped 6.3
percent, the biggest gain since December 2011. Orders for the
so-called core capital had slipped 0.3 percent in December.
"The strong gains in core capital goods orders suggest that
business investment activity, which has been one of the sour
points of this economic recovery, could provide a meaningful
lift to overall economic activity this quarter," said Millan
Mulraine, a senior economist at TD Securities in New York.
Economists had expected core capital goods orders to only
rise 0.2 percent. Business spending regained its footing in the
fourth quarter after contracting in the prior period.
In a separate report, the National Association of Realtors
said its pending home sales index increased 4.5 percent to its
highest level since April 2010 - just before the expiration of
the home-buyer tax credit.
The rise in signed contracts, which become sales after a
month or two, added to data such as building permits and home
prices that have suggested a decisive turnaround in the housing
The sector is no longer a drag on the economy and home
building added to economic growth last year for the first time
Still, the reports are unlikely to change the Federal
Reserve's very easy monetary policy stance.
Stocks on Wall Street were trading higher on the data.
Prices for U.S. government debt were mixed, while the dollar was
weak against a basket of currencies.
FACTORY ACTIVITY COOLING
The Commerce Department report also showed durable goods
orders excluding transportation increased 1.9 percent last, the
largest gain since December 2011, after increasing 1 percent in
That was well above economists' expectations for a 0.2
However, overall orders for durable goods - items from
toasters to aircraft that are meant to last at least three years
- tumbled 5.2 percent as demand for civilian and defense
aircraft fell sharply.
Last month's drop was the first since August.
Factory activity has cooled in recent months after helping
to lift the economy from the 2007-09 recession. Sluggish
domestic demand, tighter fiscal policy and slowing global growth
are holding back manufacturing.
Last month, shipments of non-defense capital goods orders
excluding aircraft, used to calculate equipment and software
spending in the gross domestic product report, fell 1 percent
after being flat the prior month.
Overall orders for durable goods were dampened by a 19.8
percent drop in transportation equipment as demand for civilian
aircraft dived 34 percent.
Boeing received orders for only 2 aircraft, down from 183 in
December, according to information posted on the plane maker's
website. The decline in orders is probably not related to the
grounding of Boeing's 787 Dreamliners after problems with
Aircraft orders are very volatile and typically tend to
fall at the start of the year.
"I haven't heard any reports about airlines canceling their
orders. This could be one-month lull rather than something
greater," said Stephen Stanley, chief economist at Pierpont
Securities in Stamford, Connecticut.
Defense aircraft orders collapsed 63.8 percent after soaring
58.5 percent in December, likely as orders were pushed forward
ahead of $85 billion in government-wide spending cuts.
The cuts, which are part of a plan to reduce the budget
deficit, are set to kick in on Friday, unless Congress and the
Obama administration come up with a last minute deal. Defense
will bear much of the cuts.
Fed Chairman Ben Bernanke on Tuesday urged lawmakers to
avoid the sharp spending cuts and warned they could combine with
earlier tax hikes to create a "significant headwind" for the
Defense capital goods orders plunged 69.5 percent in
January, the sharpest fall since July 2000. Orders for motor
vehicles were flat.
Orders for machinery recorded their largest increase since
May 2010. There were also gains in orders for fabricated metal
products, electrical equipment and appliances.