US durable goods surge on transportation, but business spending weak

[WASHINGTON] Orders for long-lasting US manufactured goods surged in April on strong demand for transportation equipment and a range of other products, but continued weakness in business spending plans suggested the manufacturing rout was far from over.

The Commerce Department said on Thursday orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, jumped 3.4 per cent last month after an upwardly revised 1.9 per cent increase in March.

Durable goods orders were previously reported to have risen 1.3 per cent in March.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.8 per cent after an upwardly revised 0.1 per cent drop the prior month. These so-called core capital goods orders have now declined for three consecutive months. They were previously reported to have declined 0.8 per cent in March.

Economists polled by Reuters had forecast durable goods orders rising 0.5 per cent last month and core capital goods orders increasing 0.4 per cent.

Manufacturing, which accounts for 12 per cent of the economy, is struggling with the lingering effects of the dollar's past surge and sluggish overseas demand.

Spending cuts on capital projects by oilfield service firms like Schlumberger and Halliburton, whose profits have been hurt by the recent oil price plunge, and efforts by businesses to reduce an inventory bloat are also a drag.

Still, the rise in durable orders last month was another signal that the economy was gaining steam after growth braked to a 0.5 per cent annualized rate in the first quarter.

So far, reports on retail sales, housing and industrial production have offered a favorable view of the economy at the start of the second quarter.

The rise in durable goods orders last month was led by an 8.9 per cent jump in bookings for transportation equipment.

Orders for civilian aircraft soared 64.9 per cent. Orders for motor vehicles and parts increased 2.9 per cent.

There were increases in orders for fabricated metal products, computers and electronic goods, and electrical equipment, appliances and components. Orders for machinery fell 1.9 per cent and demand for primary metals was unchanged.

Shipments of core capital goods - used to calculate equipment spending in the gross domestic product report - rose 0.3 per cent, reversing March's 0.3 per cent drop.

REUTERS