US orders for durable goods fell in May

25 June 2016

Orders for durable goods, critical to US economic growth, fell across the board in May, raising further doubts about the health of the economy in following the weak May jobs report.

US-made durable goods orders were down a seasonally adjusted 2.2 per cent last month after a revised 3.3 per cent gain in April, the government reported yesterday. The government had earlier reported a 3.4 per cent increase for April.

Core capital orders dropped 0.7 per cent in May, a sign that companies were still not investing as much as they normally did when the economy was growing. This key reading had been down five of the last seven months.

According to commentators, the decline might undermine the Fed's confidence that the economy would rebound over the rest of the year.

Shipments of core capital goods, meanwhile, shrunk 0.5 per cent in May, reversing a 0.6 per cent gain in April. The number is used to help determine the pace of expansion of the economy.

The increase in May shipments suggested business investment would be a drag on second-quarter gross domestic product.

Overall, transportation orders led the drop in May, falling 5.6 per cent with orders for autos falling 2.8 per cent.

According to economists, the uncertainty over the global economy and the upcoming US presidential elections were making companies cautious about spending and the uncertainty was likely to be exacerbated by the UK's shock vote to leave the EU on Thursday.

"The surprising Brexit outcome of the British referendum will result in the intensification of these uncertainties, potentially hampering business capital investment," said Millan Mulraine, deputy chief economist at TD Securities in New York, Reuters reported.

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