Durable-goods or­ders jump 6.5% in June af­ter 2 drops

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM -

WASH­ING­TON — Or­ders for long-last­ing U.S. fac­tory goods posted the big­gest gain in nearly three years last month, pulled up by a surge in de­mand for civil­ian air­craft.

The Com­merce Depart­ment said Thurs­day that or­ders for durable goods — which are meant to last at least three years — climbed 6.5 per­cent in June, re­vers­ing two straight monthly drops. The June in­crease was the big­gest since July 2014.

Spend­ing on durable-goods ac­counts for a small part of Amer­i­can eco­nomic out­put. But changes in durable-goods or­ders of­ten sig­nal where the econ­omy is headed; so fore­cast­ers and in­vestors watch the re­port closely.

While any uptick in or­ders is good news for the U.S. econ­omy and for Amer­i­can man­u­fac­tur­ers, the June num­bers aren’t as im­pres­sive as they first ap­pear.

The bulk of the in­crease came from a 131.2 per­cent surge in or­ders for civil­ian air­craft, a cat­e­gory that bounces around wildly from month to month. Boe­ing Co., the Chicago-based aerospace com­pany, said it re­ceived 184 or­ders for air­craft in June, the most this year and up from 13 the pre­vi­ous month.

Ex­clud­ing or­ders for trans­porta­tion equip­ment, which rose 19 per­cent over­all, durable-goods or­ders edged up just 0.2 per­cent last month.

More­over, a num­ber that is seen as a har­bin­ger of fu­ture busi­ness in­vest­ment — or­ders for cap­i­tal goods, ex­clud­ing mil­i­tary equip­ment and air­craft — slipped 0.1 per­cent in June.

U.S. in­dus­try has re­bounded from a slump in late 2015 and early 2016, which was caused by cut­backs in the en­ergy busi­ness and a strong dol­lar that makes U.S. goods costlier in for­eign mar­kets. The In­sti­tute for Sup­ply Man­age­ment, a trade group of pur­chas­ing man­agers, said that its man­u­fac­tur­ing in­dex rose last month to the high­est level since Au­gust 2014.

Con­sumers prob­a­bly spent enough last quar­ter to help U.S. growth re­bound from a tepid start to the year.

Gross do­mes­tic prod­uct ex­panded at a 2.5 per­cent an­nu­al­ized rate from April to June, ac­cord­ing to the me­dian es­ti­mate in a Bloomberg sur­vey ahead of fig­ures due to­day. While that would be an im­prove­ment over the first

quar­ter’s 1.4 per­cent, some of the up­swing owes to the dis­si­pa­tion of tem­po­rary fac­tors such as low heat­ing bills, de­layed tax re­funds and volatil­ity in in­ven­to­ries. Mean­while, a gang­busters pace of busi­ness in­vest­ment ear­lier in 2017 may have eased to a more sus­tain­able rate.

It adds up to a first half in which the econ­omy looks much like it did in years past: growth of around 2 per­cent, with con­sump­tion do­ing the heavy lift­ing. The pace is in line with that of the eight-year ex­pan­sion, even though Pres­i­dent Don­ald Trump’s elec­tion vic­tory had sent U.S. con­sumer and busi­ness sen­ti­ment soar­ing on hopes that law­mak­ers would loosen reg­u­la­tion, lower taxes and in­crease in­fra­struc­ture spend­ing.

Now re­al­ity is set­ting in, with some of the post­elec­tion buoy­ancy re­treat­ing in Wash­ing­ton grid­lock on health care and taxes.

“It’s hard to be­come too op­ti­mistic when you’re talk­ing about an econ­omy that’s run­ning at about 2 per­cent,” said Michelle Meyer, head of U.S. eco­nom­ics at Bank of Amer­ica Corp. in New York. “There’s very lit­tle chance for much ac­cel­er­a­tion. Nonethe­less, growth is on­go­ing. The un­em­ploy­ment rate has gone down, job growth is fairly steady and the con­sumer should con­tinue to spend.”

In­for­ma­tion for this ar­ti­cle was contributed by Paul Wise­man of The As­so­ci­ated Press and by Pa­tri­cia Laya and Shob­hana Chan­dra of Bloomberg News.


Ken­more dry­ers and wash­ers are dis­played at a Sears store in West Jor­dan, Utah. Or­ders for durable goods rose 6.5 per­cent in June, the Com­merce Depart­ment said Thurs­day.

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