Durable Goods Orders Dip in April
Durable goods orders in the United States fell 0.5% in April, while orders for capital equipment showed gains for a second straight month, a sign U.S. business investment could pick up in the second half of the year.
Bookings for nonmilitary capital goods excluding aircraft, a proxy for future corporate spending on new equipment, advanced 1% after a 1.5% gain in March that was larger than previously estimated, data from the Commerce Department showed May 26.
Oil and mining companies are counting on a reprieve as crude prices rebound from the rout that pummeled business activity, while the strong dollar continues to undermine exports of American-made goods to overseas markets. Domestic demand should keep factories churning out goods such as cars as the labor market proves hardy.
"Without question, this is an extremely strong report, if you think about how the year started,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York. “You’re looking at a pretty nice profile for growth.”
Stock-index futures and Treasury securities fell after data added to evidence the economy is emerging from a first-quarter slowdown.
The drop in demand for total durable goods, which are meant to last at least three years, followed a 5.1% jump in March that was the biggest since July and greater than previously reported. The median forecast of 73 economists surveyed by Bloomberg News called for orders to fall 0.5%.
Estimates ranged from a drop of 2.8% to a gain of 3.5%.
Shipments for nondefense capital goods excluding aircraft, which is used in calculating gross domestic product, rose 0.8% after increasing 1%.
Americans’ appetite for new cars has been the prize for factories. Orders for automobiles climbed 0.3% last month after a 4.2% gain in March. General Motors Co. is among automakers with plans to invest. The Detroit-based company said it will spend $439 million to build a paint shop at its Corvette plant in Bowling Green, Kentucky.
Cars and light trucks sold at a 16.5 million annualized rate in April after a 17.1 million rate the previous month, according to Ward’s Automotive Group. That still exceeded the 16.4 million average in 2014.
Bookings for nonmilitary aircraft, which can be volatile, fell, the Commerce Department’s report showed.
Excluding transportation equipment, orders increased 0.5% after a 0.6% advance a month earlier. They were projected to rise 0.3%, according to the Bloomberg survey median.
Carrizo Oil & Gas Inc., Devon Energy Corp. and Chesapeake Energy Corp. lifted their full-year production outlooks in May, signaling that they think the worst of the oil rout is behind them.
