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US durable goods orders unexpectedly drop in May

H.S. Borji
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US durable goods orders unexpectedly declined in May, suggesting that growth in the second quarter may be slow to rebound following contraction in the first three months of the year.

Orders for manufactured goods meant to last three years or more declined 1 percent in April, following a gain of 0.8 percent the previous month, the Commerce Department reported today in Washington. Economists forecast no change for the month of May.

Excluding transportation equipment, durable goods orders declined 0.1 percent, following an advance of 0.4 percent in April.

Excluding defense equipment, orders increased 0.6 percent, official data showed.

Non-defense capital goods excluding aircraft – a gauge of business spending – increased 0.7 percent in May, following a revised gain of 1.1 percent the previous month.

Shipments of manufactured durables increased 0.3 percent to $238.6 billion, the highest level since the series was published on a NAICS basis in 1992. Shipments were led higher by primary metals, which increased 1.6 percent.

Unfilled orders for US durables, up 13 of the last 14 months, accelerated 0.6 percent to $1,087.4 billion, the highest level since the series was first published on a NAICS basis. Unfilled orders were led higher by transportation equipment, which increased 0.7 percent.

Inventories increased 1 percent to $397.8 billion, also the highest level since the series was published under the current NAICS system. Inventories of transportation equipment increased 1.1 percent.

The latest data raise concern the US economy isn’t rebounding as quickly as initially anticipated. The economy is recovering from a steep contraction in the first quarter that resulted from harsh weather.

First quarter gross domestic product contracted at the sharpest pace since the first three months of 2009, the latest estimate from the Commerce Department confirmed today.

The Commerce Department said today the US economy contracted 2.9 percent annually in the first quarter. However, economists anticipate the slowdown is only temporary. Early estimates of second quarter GDP growth range from 3 percent to 4 percent.

In its second estimate issued last month the Commerce Department said GDP contracted 1 percent. The third estimate, which is based on more complete data, showed personal consumption expenditures were smaller than previously estimated.

The decline in GDP in the first quarter was due to negative contributions from private inventory investment, exports, government spending, nonresidential fixed investment and residential fixed investment.

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