Flat demand for big-ticket items
Orders to factories for big-ticket manufactured goods were basically flat in May as strength in demand for aircraft and computers was offset by widespread weakness elsewhere.
The Commerce Department reported Wednesday that durable goods showed no change last month after declines of 1% in April and 0.2% in March.
Economists had expected a flat reading for May as the manufacturing sector continues to be buffeted by the weak overall economy. The hope is that continued strength in demand for exports will compensate for plunging demand for autos and building supplies, two sectors that have been especially hardhit by the current economic slowdown.
The economy has continued to expand, although at a weak rate, despite sizable headwinds from a prolonged slump in housing and a severe credit crisis.
Federal Reserve: The Federal Reserve, wrapping up a two-day meeting on Wednesday, is expected to keep interest rates unchanged, capping a series of seven straight rate cuts that it instituted in an effort to keep the country out of a deep recession.
The government on Thursday will issue a revised report on overall economic growth, as measured by the gross domestic product, for the January-March quarter. The expectation is that it will show the GDP expanding at a 1% rate in the first quarter, a slight improvement from the 0.9% estimate made a month ago.
Aircraft: The reading on durable goods, items expected to last at least three years, showed that strength in May came from a 10.3% jump in demand for commercial aircraft and a 14.9% increase in orders for military planes and parts creditscore. This helped cushion a 3.3% decline in orders for motor vehicles. The auto industry is struggling with slumping sales, reflecting the weak economy and soaring gasoline prices, which have dampened demand for sport utility vehicles and other gas-guzzling vehicles.
Total orders in the transportation sector were up 2.6% as the strength in airplanes offset the weakness in autos.
Excluding the volatile transportation sector, orders for durable goods fell 0.9%, reflecting weakness in a number of areas outside of transportation. This drop was slightly worse than expected and was the biggest decline for these categories in three months.
Metals and machinery: Orders for primary metals such as steel dropped by 1.3% while demand for machinery was down 5.3%. Demand for computer equipment rose by 10.1% while orders for communication equipment were up by 2.4%.
Orders for non-defense capital goods excluding aircraft, considered a good proxy for business investment plans, fell by 0.8% in May after having posted a big 3.1% rise in April.
Filed under: term by Pascal