Tags: durable | goods | economy | manufacturing

Orders for Durable Goods Increase More Than Forecast

Friday, 24 May 2013 08:48 AM

Orders for U.S. durable goods increased more than forecast in April, pointing to gains in business investment that will help manufacturing rebound in the second half of the year.

Bookings for equipment meant to last at least three years increased 3.3 percent last month after dropping 5.9 percent in March, the Commerce Department said in Washington. The median forecast from 78 economists surveyed by Bloomberg projected a 1.5 percent increase.

Quickening activity in the housing and auto industries may ripple throughout manufacturing, rendering the economy better able to recover from a slowdown this quarter. At the same time, government cutbacks, higher taxes on consumers and cooling exports are crimping demand, which means any acceleration will be slow to develop.

“In the near term, manufacturing is entering a soft patch, but by the second half of the year, we should see some of that softness fade, whether it’s because global growth is picking up, construction drives machinery sales or autos do well,” Joshua Dennerlein, an economist at Bank of America Corp. in New York, said before the report. “This could quash some fears about a manufacturing slowdown.”

Stock-index futures trimmed earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in June fell 0.3 percent to 1,644.7 at 8:33 a.m. in New York. The gauge had been down as much as 0.7 percent.

Survey Results

Estimates in the Bloomberg survey of economists ranged from a drop of 5.9 percent to a gain of 4.6 percent. The Commerce Department revised the March decline from a previously reported 6.9 percent drop.

Bookings for commercial aircraft climbed 18.1 percent last month after slumping 43 percent in March, today’s report showed. Boeing Co., the Chicago-based aerospace company, said it received 51 orders last month, up from 29 in March.

Excluding the more volatile transportation equipment component, durable orders climbed 1.3 percent, the first gain in three months.

Bookings for non-defense capital goods excluding aircraft, considered a proxy for business investment in items such as computers, engines and communications gear, increased 1.2 percent after a 0.9 percent gain the prior month that was previously reported as a drop.

Growth Outlook

The figures used to calculate gross domestic product this quarter were less positive, indicating business investment is cooling. Shipments of non-defense capital goods excluding aircraft dropped 1.5 percent after increasing 0.5 percent.

Gains in inventories may help offset some of the softness in capital spending this quarter, limiting the damage to growth. Stockpiles climbed 0.4 percent in April after falling 0.1 percent the prior month, according to the report.

A pickup in manufacturing would stem a recent slowdown in inventory building that has curbed activity. The Institute for Supply Management’s manufacturing index declined in March and April, falling to just above the 50 level that represents the dividing line between contraction and expansion.

The U.S. economy probably cooled in the second quarter, giving businesses a reason to reduce the amount of stockpiles they hold, according to economists surveyed by Bloomberg. The federal government has also slashed outlays under sequestration, and American earners are facing increased payroll taxes.

Second Half

In the second half of 2013, a faster expansion will probably give companies reason to spend more, supporting producers. Home construction is picking up, and automakers are boosting output.

“We see indicators which point towards strengthening economies,” Louis Chenevert, chief executive officer of United Technologies Corp., said during an industry conference on May 21. Orders in the first quarter signal a rebound in the second half of the year, he said.

Chenevert said housing starts in the U.S. could increase 25 percent in 2013, European demand has shown signs of picking up and emerging markets have “good momentum.” Hartford, Connecticut-based United Technologies makes Carrier air conditioners, Pratt & Whitney jet engines and Otis elevators.

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Orders for U.S. durable goods increased more than forecast in April, pointing to gains in business investment that will help manufacturing rebound in the second half of the year.
Friday, 24 May 2013 08:48 AM
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