Good news for U.S. economic growth in this morning's durables orders for May

06/24/2010 9:36 am EST


Jim Jubak

Founder and Editor,

Ignore the headlines saying that durable goods orders fell in May.

Boeing is almost single-handedly responsible for the drop as aircraft orders fell 30% in May after soaring by more than 200% in April. Boeing said it received just 5 orders in May after getting 34 in April and 43 in March. But that's just business as usual for the air plane maker.

Durable good orders--excluding the volatile trtansporation sector--rose in May by 0.9%, according to a report by the Department of Commerce this morning.

The May increase in orders for goods meant to last three years or more follows on a 0.8% drop in April that raised fears that the U.S. economic recovery had faltered.

With consumer spending still showing only modest growth—What do you expect with unemployment still near 10%?--U.S. manufacturing has been leading the recovery. Fears going into today’s report were that manufacturers had cut back on orders for equipment and software because of their worries that demand growth had slowed.

Instead what today’s report shows is that companies are reinvesting growing profits in their businesses. That should be enough to keep the economy growing while consumer spending catches up on an eventual, if slow, fall in unemployment.

Orders for non-defense capital goods—that’s the stuff that companies use to make more stuff—increased by 2.1% in May after falling 2.7% in April. In the last three months, orders for non-defense capital goods have climbed at a 29% annual rate.

The 0.9% increase in orders for May is a tad under the 1% median forecast by 78 economists surveyed by Bloomberg News.
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