Orders for long-lasting U.S. manufactured goods rose more than expected in June, pointing to momentum in the economy heading into the third quarter.
The Commerce Department said on Friday durable goods orders increased 0.7 per cent as demand increased from transportation to machinery and computers and electronic products.
The increase in orders for these goods, which range from toasters to aircraft that are meant to last three years or more, was above economists’ expectations for a 0.5 per cent rise and followed a 1.0 per cent drop in May.
“This is consistent with broad, increasing demand throughout the economy,” said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 1.4 per cent after declining 1.2 per cent the prior month. The gain in the so-called core capital goods outpaced economists’ expectations for only a 0.5 per cent increase.
The signs of an improvement in business investment bode well for stronger economic growth in the second half of the year. The economy performed poorly in the first six months of 2013, hurt by an unusually cold winter.
While second-quarter growth is expected around a 3.0 per cent annual pace, it will be just be enough to regain ground lost in the January– March period. The government will release its first snapshot of second-quarter GDP next Wednesday.
Core capital goods shipments fell 1.0 per cent in June. Shipments of core capital goods are used to calculate equipment spending in the government’s GDP measurement. Core capital goods fell 0.1 per cent in May and were down in the second quarter, which suggests another quarterly decline in business spending.
Orders for transportation equipment rose 0.6 per cent as an increase in bookings for civilian aircraft offset a 2.1 per cent drop in orders for automobiles, which was the largest since December.
Unfilled orders increased 0.8 per cent last month after rising 0.7 per cent in May, showing a building up of backlogs that will keep the nation’s factories busy for a while.
Durable goods inventories rose 0.4 per cent. That supports views inventories would be a boost to second-quarter growth. A slow pace of inventory accumulation was behind the sharp contraction in output in the first quarter.
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