Demand for airplanes gives factory orders a lift in Jan.

By Martin Crutsinger
Associated Press / March 5, 2011

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WASHINGTON — Businesses ordered more manufactured goods from US factories in January, but excluding a big surge in demand for airplanes, the rise in demand was the smallest in three months.

Excluding the volatile transportation category, orders rose 0.7 percent in January, the weakest showing since October, the Commerce Department reported yesterday. And a key category that serves as a proxy for business investment plans fell by the largest amount in two years.

Helped by the surge in demand for commercial aircraft, total business orders rose 3.1 percent in January, the biggest gain in more than four years. That pushed total orders up to $445.6 billion, a level that economists view as healthy and 26.3 percent above the recession low hit in March 2009.

Yesterday’s report showed that demand for durable goods rose 3.2 percent, an upward revision from a preliminary estimate last week of 2.7 percent. Demand for nondurable goods such as chemicals, paper, and food rose 3.1 percent in January.

Orders for nondefense capital goods excluding aircraft fell 6.2 percent in January, the biggest drop since January 2009. This category is closely watched because it is viewed as a good indicator of business plans to expand and modernize their operations.

The big January drop followed two months of strong gains in business investment spending and was seen as a temporary setback. Economists believe business investment will get a boost this year from a new tax break which provides for full write-offs for capital equipment purchases made this year.

Among the areas showing weakness were orders for machinery, which fell 12.6 percent, and demand for computers and other electronic products, which was down 5.9 percent.