By David Harrisoin
WASHINGTON--Businesses are slowly starting to spend money again,
boosting orders for long-lasting manufactured goods and shaking off
their winter blues.
New orders for durable goods--products such as toaster ovens and
aircraft carriers designed to last at least three years--rose a
seasonally adjusted 3.4% in June from a month earlier, the Commerce
Department said Monday. May durable goods orders fell a revised
2.1% compared with the previously reported 2.2% decrease.
Economists surveyed by The Wall Street Journal had expected
overall orders to rise 2.7%.
Durable goods statistics are volatile and subject to large
revisions and much of June's increase was because of a surge in
aircraft orders at last month's Paris air show. Orders for
nondefense aircraft and parts were up 66.1% in June. Separately,
Boeing Co. said it received 161 orders for planes in June, up from
11 in May.
Excluding the transportation sector, orders rose 0.8%. That was
the largest monthly increase since August 2014.
Excluding defense--another volatile sector--orders rose
3.8%.
Monday's data comes as the Commerce Department gets ready to
release its first estimate of second-quarter gross domestic product
on Thursday. Economists expect the economy recovered from its
first-quarter slump, when GDP fell at an annual rate of 0.2%.
The durable goods statistics prompted analysts at J.P. Morgan to
raise their estimate of second-quarter GDP growth to 2.4% from 2.2%
thanks in part to a buildup of inventories. Likewise, Oxford
Economics analysts foresee a 2.5% increase in GDP in the second
quarter.
"Business spending will slowly accelerate as global headwinds
dissipate but we don't expect 2015 to be a 'boom' year," wrote
Gregory Daco, head of U.S. Macroeconomics at Oxford Economics, in a
note to clients.
Stephen Stanley, chief economist at Amherst Pierpont Securities
said the report was cause for modest optimism.
"The June results provide the first glimmer of hope for business
investment in equipment in quite some time, but so far, it is no
more than a glimmer," he wrote in a note to clients.
A key measure of business investment also rose in June. Orders
for nondefense capital goods excluding aircraft, which is
considered a proxy for business spending on equipment and software,
climbed 0.9%, following a 0.4% decrease in May.
June's orders, while encouraging, weren't enough to compensate
for weakness earlier in the year, when a harsh winter, port
disruptions, falling oil prices and a strong dollar all combined to
depress spending by manufacturers. New orders are down 2% in the
first half of the year compared with the same period in 2014.
"Business investment remains firmly in the red," wrote Lindsey
M. Piegza, chief economist at Stifel Economics. "Without business
development, hiring will remain lackluster and, more importantly,
income growth will remain stagnant, continuing to restrain the
American consumer."
But there are other indications that the outlook for U.S.
manufacturers may be improving.
Industrial production, a measure of output in the manufacturing,
utilities and mining sectors, rose a seasonally adjusted 0.3% in
June, according to a revised Federal Reserve report released
earlier this month.
And a survey of supply-chain executives conducted by the
Institute for Supply Management found renewed optimism among
purchasing managers.
Write to David Harrisoin at david.harrison@wsj.com
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