Durable-Goods Orders Slide Manufacturing is Slowing


Demand for U.S. manufactured durable goods slid in June for a second consecutive month in another sign the manufacturing sector expansion is slowing.

Durable-goods orders fell by 1.0% to a seasonally adjusted $190.5 billion, the Commerce Department said Wednesday. Economists surveyed by Dow Jones Newswires expected a 1.1% gain.

The decline was mixed, with some categories of goods in the report rising and others falling.

A barometer of capital spending by businesses rose. Orders for nondefense capital goods excluding aircraft increased by 0.6%, after rising 4.6% in May. Capital equipment demand seems to be strengthening slowly, a manufacturing trade group says. “Based on our data, the equipment finance industry continues to show gradual but steady growth,” said William G. Sutton, president of the Equipment Leasing and Finance Association.

But other economic data have showed weakness in manufacturing. Federal Reserve data two weeks ago said production by industries in the U.S. last month barely increased. The size of the gain, driven by utility output amid hot weather, signaled manufacturing is cooling off from a pace that has led the overall economic recovery. The latest Institute for Supply Management’s manufacturing index moved to 56.2 in June — down from 59.7 and 60.4 recorded for prior months. Readings above 50 signal expansion; therefore, June’s ISM reading, while a drop, reflected continued growth, yet at a slower pace.

A durable good is designed to last at least three years, such as a car. Year to date, durables are up 16.5%, in unadjusted terms, from the same six-month period in 2009. Overall durables in May fell 0.8%; previously durables for that month were seen down 0.6%.

June’s report suggested flat demand for durables in the future, with unfilled manufacturers’ orders were unchanged.

Durable-goods shipments of manufacturers dropped 0.3% last month. Inventories rose 0.9%.

Orders for transportation-related goods decreased 2.4%, pushed down by civilian aircraft. Car demand rose.

Outside of the transportation sector, orders for all other durables decreased by 0.6% in June.

Fabricated metals, electrical equipment, and communications equipment rose, but machinery and primary metals fell.

June capital goods orders fell 2.3%. Non-defense capital goods, items meant to last 10 years or longer, dropped 1.6%. Defense-related capital goods orders fell by 6.8%. Excluding defense, all other durables decreased 0.7% in June.

Ex-defense orders in May fell 0.7%. Ex-transportation orders that month rose 1.2%.

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