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Orders for Durable Goods up 0.7%

By Associated Press - Jul 25, 2014 at 9:32AM

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The strength came from solid gains in demand for commercial aircraft and machinery.

In this March 14, 2014 photo, an assembly line worker works on a 2015 Chrysler 200 automobile at the Sterling Heights Assembly Plant in Sterling Heights, Mich. (AP Photo/Paul Sancya)

WASHINGTON (AP) -- Orders for long-lasting manufactured goods rebounded in June after a May decline, helped by a recovery in demand in a key category that signals business investment plans.

Orders for durable goods increased 0.7% in June on a seasonally adjusted basis following a 1% decline in May, the Commerce Department reported Friday.

A category viewed as a proxy for business investment plans rose a solid 1.4%, recovering after a revised 1.2% drop in May. It was the best showing since orders in this core capital goods category rose 4.7% in March.

The strength last month came from solid gains in demand for commercial aircraft and machinery. Analysts expect economic activity will strengthen in the second half of the year, helped by stronger factory production.

The 0.7% overall increase was in line with economists' expectations and pushed total orders to $239.9 billion. So far this year, orders are up 3.5% over the same period last year.

Demand for transportation products rose 0.6%, reflecting a big 8.2% gain in orders for commercial aircraft which offset a 2.1% drop in demand for motor vehicles. The drop in auto demand was expected to be temporary given strong sales of new cars this year.

Orders for machinery rose 2.4% while demand for primary metals such as steel increased 0.9%.

Orders for computers and related products dropped 13.9% but that followed a big 11.5% increase in the previous month.

The overall economy went into reverse in the January-March quarter, with output shrinking at an annual rate of 2.9%. That reflected in part a severe winter that disrupted U.S. economic activity, from factory production to shopping.

Economists expect that growth rebounded to a rate of around 2.9% in the April-June quarter and they are looking for momentum to build even more in the second half of this year.

The optimism is based on a belief that the 5-year-old economic recovery is finally gaining traction, with businesses confident enough to step up hiring. That uptick in hiring is expected to power stronger consumer spending and more factory production.

The government reported that factory output increased for a fifth straight month in June as manufacturers cranked out more aircraft, chemicals and furniture. For the April-June quarter, manufacturing output accelerated to the fastest pace in more than two years and economists are looking for further gains in the months ahead, reflecting strong demand for autos and increased spending by businesses on new equipment.

A surprisingly resilient jobs report for June showed that factories added 16,000 positions, the most in four months, and the average work week for manufacturing employees remained at a post-recession high.

The Institute for Supply Management reported that its closely watched manufacturing index expanded in June for a 13th straight month with broad-based growth across nearly all of the 18 sectors that the index covers.

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