Business
July orders for U.S. durable goods rise
01:00 AM EDT on Thursday, August 28, 2008
Orders for durable goods in the United States unexpectedly increased in July, indicating that growing demand from abroad is still helping companies weather a slump in consumer spending.
The 1.3-percent gain in bookings of goods meant to last several years matched the previous month’s rise, which was larger than previously estimated, the Commerce Department said yesterday in Washington. Excluding transportation equipment, orders climbed 0.7 percent after a 2.4-percent increase a month earlier.
Sales overseas have helped U.S. factories withstand the three-year housing slump and tighter lending rules that have caused Americans to cut back. Still, economies abroad are now also weakening, signaling that companies will not be able to count on sustained gains in exports.
“Exports have thrown manufacturing a lifeline,” Ryan Sweet, an economist at Moody’s Economy.com in West Chester, Pa., said before the report. “The big question for exports and manufacturers is how long the global economy will hold up.”
Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, increased 2.6 percent, the most since April. Shipments of those items, used in calculating gross domestic product, rose 0.6 percent following a 0.4-percent gain that was smaller than previously estimated.
Yesterday’s revisions will probably have little impact on economists’ forecasts for growth in the second quarter. Revised gross domestic product figures from the Commerce Department, due today, may show the economy expanded at a 2.7-percent annual rate from April through June, up from an advance estimate of 1.9 percent reported last month as exports jumped, according to a Bloomberg survey.
Business spending on new equipment and software dropped at a 3.4-percent annual pace last quarter, the second consecutive decline and the biggest since the first three months of 2004, according to the government’s advance estimate issued last month.
Gains in orders for metals, machinery, communications gear, automobiles and aircraft all contributed to the increase in demand last month.
Orders for transportation equipment rose 3.1 percent, led by a 28-percent jump in airplane bookings. Demand for automobiles climbed 1.2 percent.
The gain in autos may have reflected a continued rebound following the end of a strike at American Axle & Manufacturing Holdings Inc., the largest axle supplier for General Motors Corp. GM said June 16 it had returned to full production.
Such gains are unlikely to continue as sales slump. Auto-industry figures this month showed purchases of cars and light trucks in the United States fell in July to a 12.5 million annual rate, the lowest level since March 1993, as consumers faced record gas prices.
Growth in coming quarters probably will slow as the effects of the federal tax rebates wear off and consumer spending weakens. Retail sales in July fell 0.1 percent, the first decline in five months, the Commerce Department reported Aug. 13.
“An increasingly strained consumer, deepening woes for the housing sector and a desire to pare inventories will all weigh on manufacturing output,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report.
Factories are faring better than in past downturns, helped in part by a weak dollar that has helped boost exports. The Institute for Supply Management’s manufacturing index for July fell to 50, the dividing line between growth and contraction, from 50.2 a month earlier. During the 2001 recession it averaged 43.5.
Manufacturing “declined or remained weak in most districts,” even as “demand for exports remained generally high,” the Federal Reserve said last month in its regional economic report known as the Beige Book. Bank lending “was generally reported to be restrained.”
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