A key measure of U.S. business investment rose for a sixth straight month in October, fueling optimism over the health of the manufacturing sector despite the current surge in coronavirus infections.

The Department of Commerce reported Wednesday that orders for non-defense capital goods excluding aircraft rose 0.7% last month.

Core capital goods orders increased by 1.9% in September and the October gain was the smallest since the economy reopened last May. But investment has risen 6.2% over the past year, marking the fastest 12-month gain in a year and a half.

“The acceleration in investment is a particularly welcome sign,” MarketWatch said, noting that a pair of surveys earlier this week showed businesses are increasingly optimistic about a return to normalcy next year on the assumption that COVID-19 vaccines become widespread.

According to MarketWatch, “Businesses, especially manufacturers, are more optimistic than consumers and are planning ahead to next year. Orders for durable goods — products that last a long time — typically rise when the economy is strong or improving.”

Economists polled by Reuters had forecast core capital goods orders increasing 0.5% last month. Demand was strong for electrical equipment, appliances and components, computers and electronic products, primary metals and fabricated metal products, though orders for machinery fell.

Overall, new orders for manufactured durable goods increased $3.0 billion or 1.3% in October to $240.8 billion, lifted by a 1.2% increase in orders for transportation equipment, which followed a 3.3% jump in September.

Orders for motor vehicles and parts fell 3.2% while orders for civilian aircraft increased 38.8%.

MarketWatch said manufacturers are less likely to be affected by the coronavirus surge because “they have more control over their work environments, but they can’t escape the broader effects of prolonged restrictions on the U.S. and other countries that are key U.S. export markets.”

“The October data are positive and are indicative of building momentum,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “However, the manufacturing sector remains exposed to surging virus cases that could disrupt supply chains, weigh on demand and slow the pace of rebound going forward.”

 

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