Durable-goods dip a bit

Orders down by 0.3% in May, report shows

June 24, 2006|By MARKETWATCH

WASHINGTON -- Orders for durable goods fell 0.3 percent last month, the second decline in a row, led by a big drop in the aircraft sector, the Commerce Department reported yesterday.

Orders have been up and down for the past few months, but Bart Melek, an economist for BMO Nesbitt Burns, said, "The outlook for capital spending remains positive."

Economists expected orders to fall about 0.2 percent. The report had little market impact.

Orders for new aircraft plunged 17.9 percent in May, after a 30 percent decline in April, bringing that volatile category closer to normal levels after several months of extraordinary orders to Boeing Co., the large U.S. aircraft manufacturer.

Excluding transportation goods, new orders rose 0.7 percent.

New orders in April were revised lower to a 4.7 percent decline from 4.4 percent earlier.

Despite the two declines, orders for durable goods are up 9.5 percent for the year-to-date, but they're down 3.5 percent since a peak in December. Durable goods are large items meant to last three years or longer, such as computers, airplanes, washing machines, and steel.

Led by shipments of transportation goods, shipments of durable goods increased 2.6 percent, the largest gain since December. Shipments are up 7.3 percent year-to-date and are at a record level.

Manufacturers' inventories increased 0.4 percent. Unfilled orders rose 0.6 percent.

Orders for nondefense, nonaircraft capital goods increased 1 percent in May and are up 10 percent year-to-date, an indication that business capital investment is growing at a healthy clip. Shipments of core capital goods orders rose 0.1 percent, while April shipments were revised lower to 0.8 percent from 1.0 percent.

The report is not likely to have any impact on deliberations at the Federal Reserve next week about interest-rate policy. Immediate concerns at the Fed revolve around inflation, housing and consumer spending, not the factory sector.

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