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Orders for big-ticket durable goods posted a smaller-than-expected increase in November as declines in demand for aircraft and autos offset strength in a number of other areas, the Commerce Department reported today.

The gains outside of transportation were an encouraging sign that manufacturing is beginning to revive and will contribute to pulling the economy out of a steep recession.

The agency reported that orders for durable goods edged up 0.2 percent last month, weaker than anticipated. However, excluding transportation, orders rose 2 percent over the October level.

Demand for transportation products sank 5.5 percent as orders for motor vehicles and parts edged down 0.2 percent, the weakest showing in five months. Demand for commercial aircraft plunged 32.6 percent.

The 2 percent increase in orders excluding transportation reflected a rebound from a 0.7 percent decline in October. The October result was revised up from a much bigger 1.3 percent drop previously reported.

Strength in November was shown in a number of areas. Demand for machinery rose by 3.5 percent, orders for primary metals such as steel grew 1.4 percent and orders for computers and electronic products jumped 3.7 percent, the biggest gain since February.

The overall economy as measured by the gross domestic product grew at an annual rate of 2.2 percent in the July-September quarter, the government reported on Tuesday.

That marked a downward revision from an estimate of 2.8 percent GDP growth made a month ago. However, it was still the first positive performance for GDP after four consecutive quarters of declines. It is the strongest sign to date that the recession that began in December 2007 has ended.

The concern, however, is that the economic recovery could falter in coming months if consumers, fearful about continued increases in the jobless rate, decide to cut back on their spending, which accounts for 70 percent of total economic activity.

The government reported Wednesday that consumer spending rose by 0.5 percent in November, the second straight monthly increase as incomes, the fuel for future spending, rose by 0.4 percent, the fastest pace in six months. Analysts, however, are worried that these gains will taper off in coming months.

The report on durable goods – items expected to last at least three years – showed that demand for non-defense capital goods excluding aircraft rose by 2.9 percent in November, rebounding from a 2 percent drop in October. It was the best showing since a similar gain in September. This category is closely watched because economists considered it a good proxy for business investment.

Consumer prices rise as expected
 
Surging energy costs pushed up consumer prices rose in November, but prices were flat excluding food and energy, the Department of Labor reported today

The agency said its Consumer Price Index leaped 0.4 percent on a seasonally adjusted basis after an unrevised 0.3 percent gain in October. A 4.1 percent burst in the energy index led the rise as gasoline, electricity, fuel oil, and natural gas prices rose.

Prices rose 1.8 percent over the last 12 months, as expected, the first year-over-year gain since February. Core prices rose 1.7 percent over the 12-month period.

When food and energy costs were stripped away, November core prices were unchanged from the previous month, the smallest change since December, as declines in shelter costs offset gains in prices for vehicles, medical care and airline fares.

The unemployment rate edged down to 10.0 percent in November, and nonfarm payroll employment was essentially unchanged (-11,000).  Additionally, after revision, the estimates of job loss for September and October were smaller than reported last month.  In November, job losses occurred in construction, manufacturing, and information, while employment rose in temporary help services and health care.
    
Construction employment fell by 27,000 over the month, compared with an average monthly decline of 63,000 in the prior 6 months.  In recent months, most of the decline has occurred in the nonresidential components.  In manufacturing, employment fell by 41,000 in November, about in line with the trend over the prior 4 months.  There were notable job cuts over the month in machinery, computer and electronic products, and printing.  The factory workweek rose by 0.3 hour and has increased by one full hour since May.  In November, employment in the information industry declined by 17,000, with telecommunications accounting for half of the loss. (more…)

Productivity increased 8.1 percent in the nonfarm business sector during the third quarter of 2009 as unit labor costs fell 2.5 percent(seasonally adjusted annual rates, revised).  In manufacturing, productivity increased 13.4 percent while unit labor costs fell 6.1 percent.