Tags: Durable Goods | Orders | Economy | Corporate Spending

Orders for Durable Goods Increase After Revised Drop

Friday, 25 July 2014 08:51 AM

Orders for U.S. business equipment rose in June following a revised drop the prior month, indicating corporate investment remains stop-and-go and could hold back economic growth.

Bookings for non-military capital goods excluding aircraft climbed 1.4 percent after a 1.2 percent decrease in May that was previously reported as a 0.7 percent gain, data from the Commerce Department showed in Washington. Demand for all durable goods — items meant to last at least three years — increased 0.7 percent.

Companies are waiting to ramp up capacity until they believe demand is sustainable. As an improving job market will probably prompt consumers to keep replacing older cars, appliances and computers, a sign manufacturers will remain busy and give growth a boost in the second half of the year.

“If we would start to see a broad-based slowdown, that would be concerning,” Gennadiy Goldberg, U.S. strategist at TD Securities USA LLC, said before the report. “As the economy accelerates more quickly, that will be reflected in the durable goods data.” The data “is extremely volatile,” he added.

Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in September fell 0.2 percent to 1,977.6 at 8:37 a.m. in New York.

Unexpected Drop

Non-military capital goods excluding aircraft orders were projected to climb 0.5 percent in the Bloomberg survey of economists. Such bookings are considered a proxy for future business investment.

The median forecast of 82 economists surveyed by Bloomberg projected total durable goods orders would rise 0.5 percent. Estimates ranged from a decline of 1 percent to an increase of 2.5 percent. The May reading was revised to show a 1 percent drop compared with a previously reported 0.9 percent decrease.

Shipments of non-military capital goods excluding aircraft, used in calculating gross domestic product, dropped 1 percent in June after falling 0.1 percent the prior month, the report showed. The May reading had previously been reported as a 0.5 percent gain.

Other surveys have indicated manufacturing has improved in recent months. The Institute for Supply Management’s index was 55.3 last month, little changed from a five-month high of 55.4 in May. Readings greater than 50 indicate expansion.

Auto Sales

Factories are being helped by gains in auto demand. Cars and light trucks sold at a 16.9 million pace in June, the fastest rate since July 2006.

Residential real estate is providing less support to manufacturing than it had in prior months. Sales of new homes eased in June, a report showed yesterday. Restrictive lending rules, limited land supply, higher mortgage rates and more expensive properties are keeping a lid on how much the housing recovery can accelerate.

Even so, labor market gains are helping to keep homebuilders and appliance manufacturers positive about prospects for their industry.

“U.S. supply and demand has rebounded from a slow winter start,” Marc R. Bitzer, president of Whirlpool Corp.’s North America and Europe, Middle East and Africa regions, said in a July 23 conference call. “Macroeconomic indicators point to a strong second half, as we’re seeing the lowest unemployment rate since September 2008.”

Employers added 288,000 workers to payrolls in June, lifting the average gain so far this year to 231,000, compared to a 194,000-per-month average for all of 2013. Joblessness declined to 6.1 percent.

GDP will probably grow at a 3.1 percent annualized rate this quarter after a 3.3 percent expansion in quarter ended in June, according to the median projection in a Bloomberg survey conducted July 3 to July 9. That comes after a 2.9 percent first-quarter contraction, the worst reading since the depths of the recession, which came after an unusually harsh winter.

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Orders for U.S. business equipment rose in June following a revised drop the prior month, indicating corporate investment remains stop-and-go and could hold back economic growth.
Durable Goods, Orders, Economy, Corporate Spending
Friday, 25 July 2014 08:51 AM
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