US durable goods orders rise more than forecast
25 May 2013
US durable goods orders overtook forecasts in April, in a sign the world's largest economy would get a lift in the second half of the year as business investment strengthened.
According to analysts, with the activity picking up in the housing and auto industries manufacturing activity too might likely perk up rendering the economy better able to recover from a slowdown this quarter.
Bookings for equipment meant to last at least three years rose 3.3 per cent last month after a 5.9 per cent drop in March, according to the commerce department.
Analysts point out that gains in residential construction, increasing demand for autos and the need to update equipment would probably spur manufacturing, helping the economy recover from a slowdown this quarter. However, government cutbacks and cooling exports were restraining demand, which meant the rebound would be slow to develop.
Stocks recovered from early losses as investors weighed prospects of improvement in economic growth against concerns Federal Reserve policy makers would reduce record stimulus before the end of the year. The Standard & Poor's 500 Index was down under 0.1 per cent to 1,649.6 at the close in New York after being down as much as 0.8 per cent.
In Europe, German business confidence was up in May for the first time in three months, in an additional sign that Europe's largest economy was picking up.
The uptick was further buoyed by demand for aircraft and stronger business investment. Analysts expect the gains to hold steady this spring.
Companies' orders for machinery and electronic products increased last month, typically signs of confidence which may help assuage fears that manufacturing could drag on the economy later this year.
Factories had been seeing fewer orders at the start of the year, due partly to slower global growth amid reduced demand for exports. Economists had also worried that across-the-board federal spending cuts coupled with higher taxes would lead to businesses to cutting back on orders.
According to Paul Ashworth, an economist with Capital Economics, the April report suggested economic growth was holding up. He predicts growth in the April-June quarter would be at a rate of 2 per cent to 2.5 per cent, which was not much lower than the 2.5 per cent rate reported for the January-March quarter.
However, the payoff from the increased business investment might not come until the end of the quarter, as the government looked at shipments when it measured the gross domestic product, not orders. The shipments of goods that signaled investment plans, however fell in April, reflecting weaker demand at the start of the year.
