US durable goods orders up, but business investment slips

WASHINGTON – Orders to U.S. factories for long-lasting manufactured goods rose in April by the most since January. But much of the strength came from a surge in the volatile category of commercial aircraft. A key category that tracks business investment fell for a third straight month, a sign that manufacturing remains under stress.

Demand for durable goods jumped 3.4 per cent after a 1.9 per cent gain in March, the Commerce Department said Thursday. Orders in the closely watched category that serves as a proxy for business investment fell 0.8 per cent after a 0.1 per cent decline in March and a 2.1 per cent plunge in February.

Manufacturing has been under pressure as weak global demand and a strong dollar have hurt exports and falling oil prices have triggered cutbacks at energy companies.

Economists said a third straight decline in the business investment area was troubling.

“The consumer seems to be spending freely, but business investment in the economy’s future is not so hot right now,” said Chris Rupkey, chief financial economist at MUFG Union Bank in New York. “The economy is not firing on all cylinders if business investment spending in capital equipment is so weak.”

The rise in last month’s orders was led by a 65 per cent surge in demand for commercial aircraft — a category that is extremely volatile from month to month.

Orders for motor vehicles and parts rose 2.9 per cent, rebounding from a 3.2 per cent drop in March. Total orders in all transportation categories were up 8.9 per cent. Excluding transportation, overall orders would have been up a modest 0.4 per cent.

Demand for primary metals such as steel was flat in April while orders for machinery fell slightly. Demand for computers and related products rose solidly, while orders for appliances and other electrical equipment inched up.

The outlook for U.S. manufacturing this year remains uncertain. Some economists say they think factories will see a pickup in demand because the dollar has stopped strengthening against other currencies. The global economy also seems to have stabilized after a shaky start to the year.

But other analysts say they worry about how long it may take for manufacturing to bounce back.

The Institute for Supply Management reported that its closely watched gauge of manufacturing activity expanded for a second month in April. The index came in at 50.8 per cent, down from 51.8 in March but still above the 50 threshold that signals growth in manufacturing. The March increase followed five months of weak readings that indicated manufacturing was contracting.