By David Harrison
Businesses are slowly starting to accelerate their spending,
boosting orders for long-lasting manufactured goods and indicating
they may be shaking off their early-year 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. That marked the first increase since March.
Economists surveyed by The Wall Street Journal had predicted a 2.7%
rise.
Businesses also are increasing their investment in manufacturing
equipment and software, a possible sign of stronger factory
activity in the coming months. Orders for capital goods excluding
the volatile defense and aircraft categories climbed 0.9% in June,
following two straight months of declines.
But those promising signs mask some continuing uncertainty.
Durable-goods figures can swing widely from month to month and are
subject to large revisions. Much of the June increase came from the
heavyweight transportation sector and reflects a one-time surge in
aircraft orders tied to last month's Paris air show. In a company
report, Boeing Co. said it received 161 orders for planes in June,
up from 11 in May.
Excluding transportation, new orders rose 0.8%, the largest
increase since August 2014. Excluding defense orders, another
volatile category, orders rose 3.8%.
"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," said Stephen Stanley, chief economist at
Amherst Pierpont Securities.
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.
Overall, new orders were down 2% in the first half of the year
compared with the same period in 2014. Orders of core capital goods
were down 3.4% in the first half.
"Business investment remains firmly in the red," Lindsey M.
Piegza, chief economist at Stifel Economics, said in a note to
clients. "Without business development, hiring will remain
lackluster and, more importantly, income growth will remain
stagnant, continuing to restrain the American consumer."
IHS Global Insight economist Michael Montgomery said the report
anticipates "more chronic malaise" in the summer. "Weak orders and
bland shipments are not the stuff revivals are made of."
The durable-goods report comes ahead of the Commerce
Department's initial estimate of second-quarter economic growth on
Thursday. Several analysts said the durable-goods numbers suggest a
modest expansion in gross domestic product in the second quarter,
after an annualized 0.2% contraction in the first quarter.
Analysts at J.P. Morgan Chase raised 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% expansion in the second quarter.
"Business spending will slowly accelerate as global headwinds
dissipate but we don't expect 2015 to be a 'boom' year," Gregory
Daco, head of U.S. Macroeconomics at Oxford Economics, said in a
note to clients.
Still, 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.
Access Investor Kit for The Boeing Co.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US0970231058