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April 4, 2012

Factory orders are on the rise

By Martin Crutsinger Associated Press

WASHINGTON — Businesses ordered more machinery and equipment from U.S. factories in February, a signal that many are investing in their companies despite the expiration of a tax credit.

Orders to U.S. factories increased 1.3 percent in February, the Commerce Department said. That offset a similar decline in January.

Demand for so-called core capital goods, a gauge of business investment plans, rose 1.7 percent. That was better than the government’s preliminary estimate last week and followed a steep drop in January.

U.S. factory orders have been steadily rising since the recession ended nearly three years. Orders totaled $468.4 billion in February, just 3.4 percent below the previous peak hit in 2008.

Last year, businesses could reduce their taxable profits by an amount equal to the cost of a major investment. The credit spurred a jump in orders for industrial machinery, computers and other capital goods at the end of last year. Spending on core capital goods surged 3.5 percent in December, then fell by nearly as much in January after the tax credit expired.

Joshua Shapiro, chief economist at MFR Inc., wrote in a note to clients that the rebound in February suggests the tax credit played “a substantial role in the December/January gyrations.”

In February, orders for durable goods, items expected to last at least three years, increased 2.4 percent. That was slightly higher than the estimate the government made in last week’s preliminary report.

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