U.S. Durable Goods Orders Jump in April

May 26, 2010
New orders increased 2.9% to $193.9 billion.

New orders for big-ticket manufactured goods rose unexpectedly in April, the Commerce Department said on April 26, underscoring recovery in the manufacturing sector.

New orders for manufactured durable goods -- items such as planes, cars, refrigerators and computers that could last at least three years -- increased 2.9% to $193.9 billion.

This was the fourth increase in the last five months and followed a revised flat reading in March. Most economists had expected a 1.5% rise in April.

Durable goods orders excluding transportation, considered the most volatile component in the data, decreased 1% -- well below expectations of a 0.7% increase.

Transportation equipment, up following two consecutive monthly decreases, had the largest gain, 16.1% to $50.7 billion -- due to an increase in non-defense aircraft and parts' orders.

"Despite the 2.9% overall increase, the disappointing report on durable goods demand for April testifies to the still tenuous nature of the U.S. economic and manufacturing recovery," said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI.

"Though new orders rose by nearly 3%, after essentially flat growth in the previous two months, orders fell by 1% after stripping out the volatile transportation component, which was supported by a nearly 230% increase in demand for nondefense aircraft and parts. Activity appears to have slowed in key parts of the manufacturing supply chain as evidenced by a nearly 6% drop in machinery demand and a 2% decline in orders for primary metals, albeit following strong activity in previous months in both industry sectors.

"The uneven revival in capital spending, a critical issue for U.S. factory sector prospects, has been largely generated by a surge in orders for computers and information processing equipment at growth rates which are unsustainable," he added. "Looking ahead, the risks to the uneven global economic recovery brought about by the turmoil in the Eurozone is not good news as the U.S. manufacturing recovery struggles to transition from one that is powered by inventory restocking and fiscal stimulus to growth that is supported by sustainable domestic and global economic activity."

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