U.S. durable goods orders up 3.6 percent in May

Published: Tuesday, June 25, 2013 9:04 a.m. CDT

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WASHINGTON – U.S. businesses stepped up their orders for long-lasting manufactured goods in May, and a gauge of their investment plans rose for a third straight month.

The Commerce Department said Tuesday that orders for durable goods rose 3.6 percent, matching April's gain. Most of the increase was due to a surge in commercial aircraft orders, which tend to fluctuate sharply from month to month. Still, businesses also ordered more computers, communications equipment, machinery and metals.

A category of orders that's viewed as a proxy for business investment plans — which excludes the volatile areas of transportation and defense — rose 1.1 percent. That matched similar gains in April and March.

This category of orders hadn't increased for three straight months since the fall of 2011. The consecutive increases raise hopes for a pickup in U.S. manufacturing in the second half of the year.

Some economists had feared that orders that reflect business investment would be weak in May. Paul Ashworth, chief U.S. economist at Capital Economics, said the pickup in orders should translate into stronger economic growth in the July-September quarter.

U.S. manufacturing has struggled this year, in part because economic weakness around the world has slowed demand for American exports. Economists say that some businesses may also be acting more cautious because of deep federal spending cuts that began in March. One measure of manufacturing activity fell in May to the lowest level in four years.

Overall demand for durable goods, which are items expected to last at least three years, rose to a seasonally adjusted $231 billion in May. That's 7.7 percent more than the level a year ago.

The gains suggest that businesses are growing more confident in the economy. More demand for durable goods could accelerate activity at U.S. factories.

The overall economy grew at an annual rate of 2.4 percent in the January-March quarter, a figure that will be revised Wednesday. Economists think that figure will remain unchanged.

But many analysts think growth has slowed in the April-June quarter to an annual rate of 2 percent or less. Analysts are more optimistic that economic growth will accelerate in the second half of the year.

The durables report showed that demand for transportation products increased 10.2 percent in May, led by a 51 percent surge in orders for commercial aircraft. Orders for motor vehicles and parts fell 1.2 percent.

Excluding transportation, orders increased 0.7 percent in May. That followed a 1.7 percent rise in April.

Orders for heavy machinery rose 1.2 percent. Demand for computers increased 1 percent. And demand for primary metals such as steel rose 0.9 percent. Orders for communications equipment shot up 12.6 percent.

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