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UPDATE 1-U.S. durable goods orders unexpectedly rise

Published 10/29/2008, 09:14 AM
Updated 10/29/2008, 09:18 AM
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(Adds details from report, analyst and market reaction)

By Doug Palmer

WASHINGTON, Oct 29 (Reuters) - New orders for long-lasting manufactured goods rose unexpectedly in September, led by surging demand for aircraft and autos, but analysts said the underlying trend remained weak.

Commerce Department data on Wednesday showed orders for durable goods -- items intended to last three years or more -- rose 0.8 percent after a 5.5 percent drop in August.

The August decline previously was reported as 4.8 percent.

Wall Street economists surveyed by Reuters had forecast a 1.2 percent decline in September orders.

U.S. stock index futures added to gains after the surprise rise in orders, while U.S. government debt prices pared gains.

However, year-to-date durable goods orders were 1.8 percent below the same period last year, and orders for non-defense capital goods excluding aircraft, seen as a barometer of business spending plans, fell 1.4 percent after decreasing 2.2 percent in August.

"This reinforces the idea that companies are cutting business investment because of tight credit conditions and prospects of lower revenues," said Anna Piretti, senior economist at BNP Paribas in New York. "We are going to see more weakness to come."

The Commerce Department reports third-quarter gross domestic product on Thursday, and Piretti said "we do expect a negative GDP reading in the third quarter. We expect a reduction in structural and industrial spending."

Transportation orders rose 6.3 percent, including a 3 percent gain for autos and auto parts -- the biggest jump since July 2007. Orders for civilian aircraft jumped 29.7 percent, following a 37.7 percent drop in August.

Orders for defense capital goods increased 19.6 percent in September, the largest since December 2007, after increasing 8.4 percent in August. About one-quarter of the September gain came from new orders for aircraft and parts.

Excluding transportation, September durables orders were down 1.1 percent after falling 4.1 percent in August. (Editing by Andrea Ricci)

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