Factory Orders Seen as Sign of Rising Investment Plans
WASHINGTON — Businesses stepped up their orders in May for long-lasting manufactured goods, and a gauge of their investment plans rose for a third straight month.
The Commerce Department said on Tuesday that orders for durable goods rose 3.6 percent, matching April’s gain. Most of the increase was because of a rise in commercial aircraft orders, which tend to fluctuate sharply from month to month. Still, businesses also ordered more computers, communications equipment, machinery and metals.
A category of orders that is viewed as a proxy for business investment plans — which excludes the volatile areas of transportation and military goods — rose 1.1 percent. That matched similar gains in April and March, suggesting that businesses are growing more confident in the economy.
This category of orders had not increased for three straight months since the fall of 2011. The consecutive increases raised hopes for a pickup in American manufacturing in the second half of the year.
Some economists had feared that orders that reflect business investment would be weak in May. Paul Ashworth, an economist at Capital Economics, said the pickup in orders should translate into a stronger economic growth in the July-September quarter.
Manufacturing in the United States has struggled this year, in part because economic weakness around the world has slowed the demand for American exports. Economists said that some businesses may also be acting more cautious because of deep federal spending cuts that began in March. One measure of manufacturing activity fell in May to the lowest level in four years.
Overall demand for durable goods, which are items expected to last at least three years, rose to a seasonally adjusted $231 billion in May, or 7.7 percent more than the level a year ago.
The Commerce Department report showed that the demand for transportation products increased 10.2 percent in May, led by a 51 percent surge in orders for commercial aircraft. Orders for motor vehicles and parts fell 1.2 percent.
Excluding transportation, orders increased 0.7 percent in May. The rise in April was 1.7 percent.
Orders for heavy machinery rose 1.2 percent. Demand for computers increased 1 percent. And demand for primary metals like steel rose 0.9 percent. Orders for communications equipment increased 12.6 percent.