BLBG:U.S. Durable Goods Orders Rose 1.6% In June On Aircraft Demand
Orders for U.S. durable goods climbed more than projected in June as a surge in demand for aircraft and military hardware overshadowed a slump in business equipment spending.
Bookings for goods meant to last at least three years rose 1.6 percent for a second month, a Commerce Department report showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 0.3 percent gain. Orders excluding the volatile transportation category unexpectedly dropped 1.1 percent in June, the most in five months.
Corporate spending is contributing less to the expansion as cooler demand from U.S. consumers and weaker overseas sales crimp profits at companies such as Xerox Corp. (XRX) Federal Reserve Chairman Ben S. Bernanke told Congress last week manufacturing has slowed and that policy makers stand ready to employ more stimulus if needed to help spur the world’s largest economy.
“We’re starting to see the manufacturing side of the economy slow a little more,” Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York, said before the report. “Weak global demand is slowing exports. Business investment is where the fiscal cliff really bites.”
Survey estimates of 78 economists for bookings ranged from a decline of 1.4 percent to an increase of 2.1 percent. Bookings excluding transportation were projected to climb 0.1 percent.
Civilian aircraft bookings jumped 14.3 percent, while military orders surged 62 percent, the most since December 2007, today’s report showed. Boeing Co. (BA), the Chicago-based aerospace company, yesterday boosted its forecast for the second time this year amid increasing deliveries of commercial and military jets.
Capital Equipment
Orders for non-defense capital goods excluding aircraft dropped 1.4 percent after a 2.7 percent rise in the prior month. The median projection in the Bloomberg survey called for a 0.1 percent increase.
Demand for computers and communications equipment slumped 4.9 percent last month, while orders for machinery dropped 1.1 percent.
Bookings for non-defense capital goods excluding aircraft are considered a proxy for future business investment in items such as computers, engines and communications gear.
Shipments of those capital goods, used in calculating gross domestic product, increased 1.2 percent after rising 1.1 percent the prior month. Unfilled orders for such equipment were little changed in June, indicating production may cool.
The expiration at the end of 2011 of a tax incentive allowing 100 percent depreciation on equipment purchases also may have prompted a slowdown in business investment this year. The allowance for 2012 is 50 percent.
Regional Manufacturing
Regional reports indicate a mixed picture for factories in July. Manufacturing in the Philadelphia region shrank for the third consecutive month, while New York-area factories grew at a faster pace than anticipated.
At the national level, the Markit Economics preliminary index of U.S. manufacturing decreased to 51.8 in July from 52.5 a month earlier, the London-based group said this week.
Xerox, the Norwalk, Connecticut-based provider of printers and business services, cut its full-year profit forecast as the economic slump in Europe crimped demand for technology.
“The economic uncertainty has created more pressure especially in Europe and especially in our technology business,” Ursula Burns, chief executive officer, said on a July 20 conference call with analysts.
Motor Vehicles
The auto industry has been one of the economy’s few bright spots. Vehicle purchases accelerated in June from the prior month, with General Motors Co., Ford Motor Co. and Chrysler Group LLC reporting sales that exceeded analysts’ estimates.
Today’s data showed orders for motor vehicles and parts fell 0.6 percent, the biggest decline since September.
At the same time, a pickup in home construction has helped some manufacturers. Caterpillar Inc. (CAT), the largest maker of construction and mining equipment, yesterday raised its full-year profit forecast on increased demand from North American builders.
Bernanke told lawmakers last week the risks from Europe’s debt crisis and impending changes in U.S. fiscal policy are challenges for the economy, and manufacturing has “slowed in recent months.”
“Economic activity appears to have decelerated somewhat during the first half of this year,” he said in testimony to Congress. The Fed is “prepared to take further action as appropriate to promote a stronger economic recovery.”
To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
