Wednesday, July 28, 2010

Durable goods orders fall 1% in June

New orders for manufactured durable goods declined for the second straight month, U.S. Census Bureau reports

New orders for manufactured durable goods fell 1%--to $190.5 million—in June, the U.S. Census Bureau reported today. This marked the second consecutive monthly decline in durable goods orders, following a 0.8% decrease in May. Excluding transportation, new orders fell 0.6%; excluding defense, new orders fell 0.7%.

Transportation equipment, which was down four of the last five months, saw the largest decrease in June--2.4% to $45.9 billion. The decrease was due to nondefense aircraft and parts, which fell $1.8 billion, according to the Census Bureau report .

Inventories, up six consecutive months, rose 0.9% in June following a 1.1% rise in May.

After release of the report, Cliff Waldman, economist for the Manufacturers Alliance/MAPI, said that although manufacturing is still on track for recovery, business is slowing.

“Amidst a sluggish and increasingly uncertain economic recovery, the June report on demand for long-lasting consumer and capital goods shows that the manufacturing recovery, while still on track, is clearly slowing,” said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI. “Total new orders for durable goods fell by 1 percent in June after a 0.8 percent decline in May. Excluding the volatile transportation category, orders fell by 0.6 percent, the second decline in three months. Year-to-date total orders excluding transportation were up more than 15 percent but the data from pivotal sectors of the manufacturing supply chain suggest that the underpinnings of the strong factory sector recovery are clearly weakening. Primary metals demand fell by 2 percent, the second consecutive monthly decline, while machinery demand declined by 0.7 percent, the second drop in the past three months.

“On a brighter note, the modest increase in new orders for non-defense capital goods excluding volatile aircraft demand shows that business equipment investment remains positive,” he added. “Capital spending is an essential ingredient for keeping the shaky U.S. economic recovery alive, given a troubled household sector that is confronting high unemployment, a continued need to deleverage amidst weaker housing and financial wealth, and tighter credit conditions. If consumer demand becomes depressed enough to stall total U.S. economic growth, the manufacturing recovery will slow even more than recent data suggest.”

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