U.S. Durable-Goods Orders Rose 1.7% in August -- Update

Demand for long-lasting U.S. factory goods rebounded in August, pointing to a continued upswing in business investment.

Orders for durable goods -- products like refrigerators and airplanes that are designed to last at least three years -- increased a seasonally adjusted 1.7% in August from the prior month, the Commerce Department said Wednesday. Economists surveyed by The Wall Street Journal had expected a milder 0.9% rise for overall orders.

Headline orders were boosted last month by a jump in the extremely volatile civilian-aircraft category, offset in part by a pullback in military purchases. Excluding the transportation segment, durable-goods orders rose a modest 0.2% in August. Excluding defense goods, orders jumped 2.2% from July.

Overall orders had jumped in June and dropped in July, skewed both months by big swings in orders for civilian airplanes and parts. More broadly, total durable-goods orders rose 5.0% in the first eight months of the year from the same period in 2016.

A closely watched proxy for business spending on new equipment, new orders for nondefense capital goods excluding aircraft, rose 0.9% in August after a 1.1% gain in July. The category was up 3.3% in the first eight months of 2017 compared with a year earlier.

"The trend in capex orders is now stronger than implied by the path of oil prices -- swings in oil sector capex have dominated the numbers in recent years -- suggesting that the recent upturn in small business capex plans...is no fluke," Pantheon Macroeconomics chief economist Ian Shepherdson said in a note to clients.

The Commerce Department said it couldn't isolate the effects of Hurricanes Harvey and Irma, which hit the U.S. in late August and September, on the data released Wednesday. The Federal Reserve earlier said Hurricane Harvey contributed to a sharp decline in U.S. industrial production last month.

Motor-vehicle orders posted a 1.5% gain in August. "The large number of vehicles destroyed in the two hurricanes will prompt auto manufacturers to ramp up orders in the months ahead," said Michael Pearce, U.S. economist at Capital Economics, in a note to clients.

Beyond month-to-month data volatility, key measures of U.S. manufacturing activity and business investment have strengthened this year. A pickup in global growth has bolstered export demand, and a weaker dollar has made U.S. products cheaper for foreign customers. Oil prices stabilized after a steep decline, reducing pressure on the domestic energy industry.

Nonresidential fixed investment -- a broad measure of business spending on equipment, structures and intellectual property products like software -- rose at a 6.9% annual rate in the second quarter after a robust 7.2% growth pace in the first three months of 2017, according to Commerce Department data.

A private-sector gauge of manufacturing activity produced by the Institute for Supply Management rose in August to its highest level since April 2011.

"Business investment has picked up, and exports have shown greater strength this year, in part reflecting improved economic conditions abroad," Fed Chairwoman Janet Yellen said last week.

But Ms. Yellen warned that U.S. economic growth in the third quarter "will be held down by the severe disruptions caused by Hurricanes Harvey, Irma and Maria," followed by a rebound as affected communities rebuild.

"Based on past experience, these effects are unlikely to materially alter the course of the national economy beyond the next couple of quarters," she said.

In the coming months, many U.S. economic indicators are likely to be scrambled by storm-related disruptions. In August, overall U.S. industrial production posted its largest one-month drop since the 2007-09 recession as Hurricane Harvey depressed oil drilling, petroleum refining and other industrial activity along the Gulf Coast, the Fed said.

In Wednesday's report, "we cannot isolate the effects of Hurricanes Harvey and Irma" because the data are designed to measure activity at the national level and lack geographic detail, the Commerce Department said in a statement.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com

(END) Dow Jones Newswires

September 27, 2017 10:18 ET (14:18 GMT)