By Dow Jones Business News,
June 25, 2014, 12:19:00 PM EDT
By Sarah Portlock
WASHINGTON--A pullback in military spending dragged down overall orders for big-ticket items from U.S. factories in
May, but underlying readings showed business spending picking up from its winter slump.
Demand for durable goods--products such as cars and refrigerators that are designed to last at least three years--
declined a seasonally adjusted 1.0% from April, the Commerce Department said Wednesday. It was the first decline in four
months. Economists surveyed by The Wall Street Journal forecast orders would remain flat compared with April's level.
But outside the volatile transportation segment, demand for long-lasting goods declined a modest 0.1%. Swings in
the civilian- and defense-aircraft categories can cause choppiness in the overall figure. And excluding defense, durable
goods orders rose 0.6%.
"In short, the orders details were not as weak as the headline figure," said Jim O'Sullivan, chief U.S. economist
at High Frequency Economics.
A U.S. Navy order of 10 new submarines for $17.6 billion likely caused April's defense capital-goods orders to
surge 38.2%. In May, the category was down 31.4%.
New orders for motor vehicles and parts, and stronger business spending largely drove the underlying gains in
A closely watched measure of business investment--orders for nondefense capital goods, excluding aircraft--rose
0.7% in May, reversing April's decline.
"These figures confirm that capital spending continues to rebound following weakness around the turn of the year,"
said Michelle Girard, an economist with RBS Securities.
Most economists expect a stronger second quarter this year after the economy contracted at a 2.9% annual pace in
the first quarter. Macroeconomic Advisers is forecasting a 3.5% growth rate for the second quarter.
A Federal Reserve report last week showed output from U.S. factories, mines and utilities rose in May, a sign of
resurgence after a harsh winter and mid-spring dip. Factory activity so far in June is still expanding, with production
surging, according to an early reading of business conditions compiled by data provider Markit. The gauge rose to its
strongest reading in four years.
And companies have been hiring at a stronger pace this spring, with May marking four straight months of job
creation above 200,000.
Write to Sarah Portlock at firstname.lastname@example.org
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