By Jeffrey Sparshott 

Orders for long-lasting factory goods increased for the fifth consecutive month in September, the latest sign manufacturing companies are rebounding from supply-chain disruptions and shutdowns related to the coronavirus pandemic.

New orders for durable goods -- products designed to last at least three years -- rose 1.9% in September compared with August, the Commerce Department said Tuesday.

A closely watched proxy for business investment -- new orders for nondefense capital goods excluding aircraft -- increased by 1% last month. The measure had recovered all of its pandemic-related losses by August, suggesting that businesses have ramped up capacity in anticipation of growing demand.

"The economic recovery isn't entirely dependent on consumers, with business equipment investment recording a swift bounce back to pre-pandemic levels," said Paul Ashworth, chief U.S. economist at Capital Economics.

Orders for transportation equipment helped drive overall gains in September, while military orders were a big drag. Excluding transportation, orders were up 0.8%. Excluding defense, they were 3.4% higher than the previous month.

U.S. factories were hit by health concerns, supply chain breakdowns and shutdowns early in the coronavirus crisis. But efforts to reopen the economy have helped manufacturers regain much of the ground lost in March and April.

Alongside September's rise for durable goods, other gauges of factory activity appear to show some momentum for the sector. Data firm IHS Markit's survey of purchasing managers at U.S. factories showed October activity expanding at the fastest pace since early 2019.

Demand has been especially high for autos, electronics and communications equipment -- a category that includes telephones -- suggesting U.S. consumer demand is also helping lift factories. Households have responded to the pandemic by cutting spending on services such as travel and in-person entertainment, and increasing purchases of goods such as cars and computers.

The report on durable goods adds to a mixed picture for the economy heading into the fall.

The Commerce Department on Thursday is set to release its report on third-quarter gross domestic product. Economists are forecasting record-breaking quarterly growth, reflecting a stronger-than-expected rebound following a sharp second-quarter contraction. Still, the Federal Reserve in its most recent forecast said it expects GDP to contract 3.7% this year, measured from the fourth quarter of 2019 to the fourth quarter of 2020.

The strongest part of the growth rebound came in May, June and July. More recent economic data suggest the economy is now growing at a slower pace while overall output and employment remain well short of pre-pandemic levels.

Tuesday's durable goods report is in line with that narrative. Even with big gains in recent months, overall durable goods orders are still shy of their immediate pre-pandemic peak.

"While the September data are positive, the risk to the manufacturing sector now comes from surging virus cases that could result in supply chains disruptions, weigh on demand and slow the pace of rebound going forward," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Write to Jeffrey Sparshott at


(END) Dow Jones Newswires

October 27, 2020 10:27 ET (14:27 GMT)

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