Durable goods orders point to factory resilience

By Jason Lange

WASHINGTON (Reuters) - Orders for long-lasting U.S. manufactured goods rose more than expected in April, a hopeful sign that a sharp slowdown in factory output could soon run its course.

New orders for durable goods, which range from toasters to aircraft, increased 3.3 percent last month, the Commerce Department said on Friday.

The data was the latest to show the U.S. economy exhibiting surprising resilience in the face of harsh fiscal austerity measures enacted this year.

"(It's) another sign that growth is holding up quite well," said Paul Ashworth, an economist at Capital Economics in Toronto.

While Washington hiked taxes in January and sweeping budget cuts began in March, consumer spending has looked relatively robust and many economists think the U.S. Federal Reserve could begin tapering a monetary stimulus program by the end of the year.

Economists polled by Reuters had expected new orders for durable goods, which are meant to last three years or more, to rise 1.5 percent last month. The Commerce Department also revised prior readings for orders to show a smaller decline in March than previously estimated.

The better-than-expected news helped contain losses on Wall Street, where stocks slipped for a third straight day. Investors fear that less monetary stimulus could crimp the supply of money for investing. Yields on U.S. government debt also declined.

NOT RIP-ROARING

Data earlier this month showed U.S. factory output fell in April for the second straight month, hurt by the European debt crisis which has weighed on demand at factories from Los Angeles to Shanghai.

Friday's report showed a measure of underlying demand in the factory sector, which strips out aircraft and military goods and is an indicator of future business spending, advanced 1.2 percent. That was a faster clip than analysts had expected.

Even if that signals a return to growth in the factory sector, economists expect government austerity will nevertheless sap strength from the economy as the year progresses.

"While (Friday's data) was definitely better than expected, I would not mistake this for rip-roaring strength," said Stephen Stanley, an economist at Pierpont Securities in Stamford, Connecticut.

Shipments of core capital goods, which go into calculations of equipment and software spending in the gross domestic product report, fell 1.5 percent.

That suggests that while there were signs businesses could spend more in coming months, actual transactions got off to a weak start in the second quarter, reinforcing the view that economic growth has slowed.

Economists polled by Reuters earlier this month expect GDP to grow at a 1.5 percent annual rate in the second quarter, down from a 2.5 percent pace in the January-March period.

Shipments of capital goods in the defense sector, which is shouldering a large share of Washington's austerity drive, fell 5.6 percent in April.

And while the strength in overall new orders was broad based, it received a boost from a rise in demand for aircraft, which is often volatile. The increase in aircraft orders was expected; plane-maker Boeing received orders for 51 aircraft, up from 39 in March, according to information posted on its website.

(Editing by Andrea Ricci)

Source: http://news.yahoo.com/durable-goods-orders-point-factory-resilience-013011415.html

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