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US Durable Goods Orders Unexpectedly Rise in April

H.S. Borji
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US durable goods orders advanced sharply in April, offering further sign the economy was regaining momentum at the start of the second quarter.

Orders for manufactured goods meant to last three years or more rose 0.8 percent in April, following an upwardly revised gain of 3.6 percent, the Commerce Department reported today in Washington. Economists forecast a sharp decline of up to 0.8 percent.

Excluding transportation equipment, durable goods orders increased 0.1 percent, following an upwardly revised gain of 2.9 percent in March. Economists expected core durables to fall 0.1 percent.

Excluding defense equipment, orders fell 0.8 percent, official data showed.

Demand for computers increased 7 percent in April, while orders for fabricated metals advanced 3.4 percent. Orders for defense-related capital goods surged 39.3 percent, the largest monthly increase since December 2012. Orders for transportation equipment increased 2.3 percent.

The gains were not enough to shore up business investment, which declined after a sharp increase the prior month. Orders for nondefense capital goods excluding aircraft – a gauge of business investment – declined 1.2 percent.

Durable goods orders entail large-scale investments, making them a key indicator of broader economic trends. Investors use durable goods orders to recognize growth trends in the economy and gauge activity levels of US factories. Manufacturers typically increase production when demand rises or scale back when orders fall.

April figures support the view the economy is rebounding sharply in the second quarter after a disappointing first quarter saw growth slow to a standstill.

The initial government estimate showed the US economy increased 0.1 percent annually in the first three months of the year, a figure expected to be revised downward later in the week to reflect contraction. Economists now say the US economy probably contracted at an annualized rate of 0.5 percent.

Early projections have benchmarked second quarter growth at 3.5 percent annually. The sharp rebound is consistent with the Federal Reserve’s projection the US economy will accelerate in the current quarter. Fed Chair Janet Yellen told lawmakers earlier this month economic recovery would deepen throughout 2014, which will continue to drive down the unemployment rate.

Yellen said the first quarter slowdown was largely attributable to “transitory factors, including the effects of the unusually cold and snowy winter weather.”

Several batches of economic data have shown the economy has in fact rebounded sharply at the start of the second quarter. US nonfarm payrolls increased 288,000 in April, the fastest monthly gain in more than two years.

Gains were also reported in the housing sector, an area of chief concern for Fed policymakers. Existing home sales increased 1.3 percent in April to a seasonally annual rate of 4.65 million, the National Association of Realtors confirmed last week. New home sales surged 6.4 percent to a rate of 433,000, according to the Commerce Department.

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