US Durable-Goods Orders Up 0.8 Percent in April

Orders to U.S. factories for long-lasting manufactured goods advanced for a third month in April, but much of the strength came from a big surge in demand for military aircraft. Orders in a category that signals business investment plans fell by the largest amount in three months.

Orders for durable manufactured goods rose 0.8 percent from the previous month after a 3.6 percent gain in March, the Commerce Department said Tuesday. The April strength stemmed from a big jump in demand for defense goods, including airplanes. Excluding defense, orders would have fallen 0.8 percent in April.

The April result supports the view that the economy stands to benefit in the coming months from increased production at factories, which should bolster growth and spur further hiring.

Orders for core capital goods, a category viewed as a proxy for business investment plans, fell 1.2 percent in April. It was the weakest showing since a 1.9 percent January drop.

The harsh winter dragged overall economic growth to a barely discernible 0.1 percent in the January-March quarter. That figure will be updated on Thursday, and many economists believe it could slip into negative territory.

But economists are looking for a significant rebound in the April-June quarter, partly reflecting pent-up demand from consumers who put off purchases because of the bad weather. Many analysts say that growth in the spring quarter could come in as high as an annual rate of between 3.5 percent and 4 percent.

Economists were encouraged by the moderate increase in April orders, which was better than the decline they had been forecasting. They also took heart from solid upward revisions that showed more strength in March than previously believed.

“We would expect to see capital goods orders and shipments continuing to trend upwards,” Amna Asaf, an economist at Capital Economics, said in a research note. “Second-quarter growth in equipment investment should be notably better.”

In April, orders for transportation goods increased 2.3 percent. That reflected a 13.1 percent surge in demand for military aircraft, which offset a 4.1 percent drop in demand for commercial aircraft. Orders for motor vehicles fell 1 percent in April, after a small 0.3 percent gain in March.

A number of categories posted declines in April. Demand for primary metals such as steel fell 0.4 percent, and orders for machinery dropped 2.9 percent. Orders for computers were up 7 percent, but demand for communications equipment fell 5.5 percent.

The 1.2 percent drop in demand for core capital goods, a category that covers non-defense equipment excluding aircraft, followed a 4.7 percent surge in March. Analysts believe business investment will rebound in coming months as companies respond to rising demand.

The Institute for Supply Management reported last week that manufacturing grew faster in April than March, as exports picked up and factories accelerated their hiring.

The ISM manufacturing index rose to 54.9 in April from 53.7 in March. Any reading above 50 indicates expansion.

Manufacturers are benefiting from increased spending by consumers and businesses. Americans are buying more at retail stores and purchasing more cars after the harsh winter. Factories are also shipping more goods overseas.

However, there is concern that slower growth in China, the world’s second-largest economy, could dampen demand for exports in coming months. China’s manufacturing sector barely grew in April, according to Chinese government statistics. A private survey found that Chinese factories actually saw production fall in April for a fourth straight month.

This article appeared in print in the May 28th, 2014 edition of Hamodia.