Durable goods orders surged in November

WASHINGTON - Orders for long-lasting U.S. manufactured goods surged in November and a gauge of planned business spending on capital goods recorded its largest increase in nearly a year, pointing to sustained strength in the economy.

The Commerce Department said on Tuesday durable goods orders jumped 3.5 percent as demand increased for a range of goods from aircraft to machinery and computers and electronic products.

Last month's increase, which outpaced economists' expectations for a 2 percent rise, more than reversed October's 0.7 percent drop. Excluding transportation, orders rose 1.2 percent, the largest increase since May.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, surged 4.5 percent, breaking two straight months of declines. It was the largest increase since January.

The report suggested strength in manufacturing and was further evidence of a firming economic growth outlook. From consumer spending to employment and trade, the foundations appear to be in place for sustained and strong economic growth in 2014.

"The better than expected 3.5 percent month-over-month jump in U.S. durable goods orders in November, although partly due to a bounce back in the volatile aircraft category, suggests that fourth-quarter business investment in equipment may have picked up a bit," said Amna Asaf, economist with IHS Global Insight, in a research note.

The data support the U.S. Federal Reserve's decision last week to start trimming back its monthly bond purchases from January, a process which is likely to continue for much of next year.

"It's encouraging after the declines we had seen with the core capital orders the past couple of months. Sentiments were showing things were good but not the hard numbers. Things seemed to have turned now," said Sam Bullard, senior economist at Wells Fargo Securities in Charlotte, North Carolina.

"This is a more encouraging sign for the outlook. Businesses going into 2014 are more confident in their outlook. The Fed is probably encouraged by this number and its recent trajectory with investments continuing to expand."

U.S. Treasury debt prices fell and yields rose on the better-than-expected durables report, which covers goods from toasters to aircraft. U.S. stock index futures were little changed.

Economists had expected orders for so-called core capital goods to increase 0.7 percent in November after a 0.7 percent fall in October.

The figures showed that shipments of core capital goods, which are used to calculate equipment spending in the government's measure of gross domestic product, increased 2.8 percent last month.

That was the largest increase since March 2012. Shipments had dropped in September and October and last month's increase could see economists bumping up their fourth-quarter GDP estimates.

Last month, durable goods orders rose almost across the board, with notable gains in transportation.

Transportation equipment orders increased 8.4 percent after falling 3.5 percent. Civilian aircraft orders jumped 21.8 percent and orders for motor vehicles recorded their largest increase since February.

Boeing received orders for 110 aircraft in November, up from 79 aircraft the prior month, according to information posted on the aircraft company's website.

Outside transportation there were gains in orders for computers and electronic products, machinery and fabricated metal products, among others.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong; Editing by Krista Hughes)