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December 23, 2016

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US economy shows signs of perking up

NEW orders for US-made capital goods rose more than expected in November amid strong demand for machinery and primary metals, suggesting some of the oil-related drag on manufacturing was starting to fade.

Other data yesterday showed the economy grew faster than previously estimated in the third quarter, notching its quickest pace in two years.

The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, added 0.9 percent after gaining 0.2 percent in October.

There were increases in orders for electrical equipment, appliances and components, as well as computers and electronic products. Economists polled by Reuters had forecast these so-called core capital goods rising only 0.3 percent in November.

A collapse in oil prices last year, together with a surge in the dollar, pressured manufacturing. Much of the impact has been through weak business spending on equipment, which has contracted for four consecutive quarters.

But with oil prices hovering above US$50 per barrel, manufacturing, which accounts for 12 percent of the US economy, is starting to rebound. Gas and oil well drilling has increased over the last several months.

In another report, the department said gross domestic product increased at a 3.5 percent annual rate in the third quarter instead of the previously reported 3.2 percent pace. That was the strongest growth rate since the third quarter of 2014 and followed the second quarter’s anemic 1.4 percent pace.

A third report from the Labor Department showed initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 275,000 last week, the highest since June.


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