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 yesterday 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."

The Conference Board's confidence index rose to 88.6 in December from 87.8 the previous month, the New York-based group said yesterday. 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, Mass., forecasting firm.

"The present situation is more influenced by the problem with energy prices," he said. "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, yesterday'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.

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."

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