By Courtney Schlisserman and Robert Willis
Dec. 27 (Bloomberg) -- The U.S. economic slowdown spread beyond housing as companies ordered fewer durable goods than forecast, even as consumer confidence improved.
Demand for cars, aircraft and other items made to last several years increased 0.1 percent in November, the Commerce Department said today in Washington. The previous month's drop was revised to 0.4 percent, greater than estimated. Excluding transportation, orders fell 0.7 percent.
Treasury notes rallied and the dollar fell as the durable goods report suggested business investment, which has helped the economy survive the housing recession, will weaken. A reduction in corporate spending would make the expansion increasingly dependent on consumers, whose view of current conditions grew more pessimistic despite their optimism about the future.
``Momentum has just nosedived over the last couple of months,'' said Michael Gregory, a senior economist at BMO Nesbitt Burns in Toronto. ``When businesses see those order books getting a lot leaner, they start to change their plans in terms of hiring and so forth.''
Stocks fell the most in a week after the reports. The Standard & Poor's 500 Index fell 1.43 percent to 1,476.27.
The Conference Board's confidence index rose to 88.6 in December from 87.8 the previous month, the New York-based group said today. The organization's measure of present conditions fell to 108.3 from 115.7. The gauge of expectations for the next six months increased to 75.5 from 69.1.
The increase in expectations ``is just one of those anomalies that sometimes happen,'' said Brian Bethune, an economist at Global Insight Inc., a Lexington, Massachusetts, forecasting firm. ``The present situation is more influenced by the problem with energy prices. Unless we get some relief from oil prices, we are in for a very rough first quarter.''
The share of consumers who said jobs are plentiful dropped to 22.7 percent in November from 23.3 percent the prior month, today's report showed. The proportion who said jobs are hard to get increased to 23.5 percent from 21.4 percent.
Separate figures from the Labor Department showed jobless claims unexpectedly rose last week by 1,000 to 349,000. The number of people continuing to collect unemployment benefits climbed to 2.713 million in the week that ended Dec. 15, the highest in more than two years.
Economists forecast durable goods orders would increase 2 percent in November, according to the median of 67 estimates in a Bloomberg News survey. Excluding transportation equipment, orders were projected to rise 0.5 percent.
Orders for military gear weakened 24 percent, led by a drop in aircraft demand. Those figures are considered volatile, so economists prefer to look at underlying trends. Bookings excluding defense equipment rose 1.2 percent.
Role of Investment
Demand for capital goods also softened, suggesting business investment will be a drag on economic growth. Orders for non- defense capital goods excluding aircraft, a proxy for future business investment, fell 0.4 percent after a 2.9 percent decrease in October that was larger than previously estimated.
``You are starting to see some evidence that housing weakness is spilling over to the broader economy,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York. ``The overall economy will weaken under the weight of a severe housing recession and tighter credit markets.''
Shipments of those items, used in calculating gross domestic product, increased 0.2 percent after dropping a larger than previously estimated 1.2 percent in October.
Orders for transportation equipment rose 1.9 percent, led by a 21 percent jump in commercial aircraft demand. Auto bookings also rose.
Boeing Co. orders more than tripled in November, to 177 planes, from the prior month. Bookings at the world's second- largest commercial plane maker have averaged 122 a month over the last three months.
Other manufacturers aren't faring as well as the housing slump deepens. Illinois Tool Works Inc., the maker of Duo-Fast nail guns, and Black & Decker Corp., the largest U.S. power-tool maker, reduced profit forecasts this month as sales in North America slowed.
Retailers have placed fewer orders with Black & Decker this quarter because consumers are buying fewer tools for home remodeling projects as the housing slump enters its third year.
``We are seeing the U.S. economy slowing,'' said Alexander M. Cutler, chief executive officer at Eaton Corp., in a Dec. 21 interview. There is the ``potential that industrial production could move to flat to slightly negative in the first quarter.''
Impact on Fedex
Even service businesses are feeling the pinch. FedEx Corp., the second-largest U.S. package-delivery company, said last week that quarterly profit fell 6.3 percent as a slowing economy cut demand for freight shipments and fuel spending rose.
The Memphis, Tennessee-based company also lowered its capital spending forecast for the full year by 11 percent, to $3.1 billion, and said additional reductions are ``possible'' as executives review investment plans.
Regional reports have shown the manufacturing outlook has dimmed. The New York Federal Reserve Bank's general economic index fell more than forecast this month and expectations for orders six months from now were the lowest in six years. The Philadelphia Fed's business gauge contracted for the first time in more than two years and a measure from the Richmond Fed shrank for the second time in three months.
Faster growth outside the U.S. has led to a surge in exports that's helped American companies weather the slowdown in domestic demand, economists said. Shipments to overseas buyers rose 0.9 percent to a record in October, the Commerce Department said earlier this month.
General Electric Co., the world's biggest maker of electricity-generating equipment, this month won an order for 28 Jenbacher natural-gas engines, the largest ever, to supply power in rural Bangladesh.
Of the 177 plane orders received by Boeing in November, 46 were from customers abroad compared with 3 from U.S. companies. The Chicago-based company didn't identify the origin of the remaining 128 bookings.