Durable Goods Orders Off 1.1%

For May durable goods decreased $2.2 billion or 1.1% to $192 billion

New orders for manufactured durable goods in May decreased $2.2 billion or 1.1% to $192 billion, the U.S. Census Bureau announced on June 24.

This decrease followed five consecutive monthly increases including a 3% April increase.

Excluding transportation, new orders increased 0.9%. Excluding defense, new orders decreased 1.1%. Transportation equipment, down three of the last four months, had the largest decrease, $3.5 billion or 6.9% to $46.9 billion. This was led by nondefense aircraft and parts which decreased $3.0 billion.

The mixed report on durable goods demand in May indicates that business capital spending, at least for the moment, is holding up in spite of mounting evidence that the tenuous economic recovery is slowing, said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI.

"More importantly, new orders for nondefense capital goods excluding aircraft, a proxy for business equipment spending, were up by 2.1%, nearly rebounding from a 2.7% decline the month before and up by more than 15% from year-ago levels.

"Unfilled orders, excluding transportation, remain modestly higher than year-ago levels indicating that moderate pipeline demand will benefit durable goods output at least for the short-term. Nonetheless, data on the economic recovery as a whole have been disturbing with especially weak recent reports on employment growth, retail sales, and housing.

"Financial market tensions in the Eurozone are likely impacting both credit availability and export demand," Waldman concluded. "When the inventory rebound, which has been so beneficial to manufacturing growth, is complete, it will be necessary to have secure and stable sources of final demand for continued factory sector output gains. Otherwise, the manufacturing recovery could realize significant headwinds."

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