US durable goods orders rise on steady business equipment demand

ORDERS placed with US factories for durable goods rose in April, highlighting firm and sustained demand for equipment and merchandise.

Bookings for durable goods - items meant to last at least three years - increased 0.4 per cent in April after a downwardly revised 0.6 per cent advance a month earlier, Commerce Department figures showed Wednesday. The figures aren’t adjusted for inflation.

The value of core capital goods orders, a proxy for investment in equipment that excludes aircraft and military hardware, climbed 0.3 per cent after a 1.1 per cent gain a month earlier.

The median estimates in a Bloomberg survey of economists called for a 0.6 per cent increase in orders for all durable goods and a 0.5 per cent gain in the core figure.

The figures suggest companies are adhering to capital expenditures plans as they seek to enhance productivity to ease the burden of high inflation and a tight labour market. It’s less clear, however, whether businesses later this year will reconsider the current pace of investment in the face of higher interest rates and an anticipated cooling of economic activity.

Core capital goods shipments, a figure that is used to help calculate equipment investment in the government’s gross domestic product report, increased 0.8 per cent, pointing to a solid start to second-quarter growth.

The government will release revised first quarter GDP figures Thursday. The advance report showed a surge in equipment investment. 

Recent regional manufacturing surveys, however, suggest a slowdown on the horizon. The Federal Reserve Bank of Philadelphia’s index of capital expenditures six months from now dropped in May to a six-year low, while a similar gauge from the New York Fed was the weakest since August. 

The advance in durable goods reflected stronger bookings for commercial aircraft, primary metals and machinery.

SEE ALSO

US business activity slows in May, survey shows

Bookings for commercial aircraft rose 4.3 per cent after falling the prior month, the government data showed. Boeing reported 46 orders in April, down from 53 a month earlier. While often helpful to compare the two, aircraft orders are volatile and the government data don’t always correlate with the company’s figures.

Bookings for motor vehicles eased after a surge in March. Durable goods orders excluding transportation equipment climbed 0.3 per cent last month. 

Even if demand for equipment slows, factory backlogs will lend support to the pace of production. The report also showed unfilled orders for all durable goods rose 0.5 per cent for a second month, while inventories increased 0.8%. BLOOMBERG