Economic Growth Worries Bring Down Durable Goods

With inflation worries, continued problems from the housing slump and economic uncertainties, orders for durable goods drop to lowest level in four months.

WASHINGTON - After increasing for the past three months, new orders for manufactured durable goods slipped 2.8 percent in May to $213 billion, according to the advance report by the U.S. Census Bureau.

(For more information, click here.)

Shipments, which had also risen the past three months, edged up 0.4 percent to $214.4 billion.

Unfilled orders rose 0.8 percent to $725.3 billion, its highest level since the series began in 1992.

Inventories, which have been up 15 consecutive months, increased 0.2 percent to $313.2 billion, also at its highest level since the series began.

Nondefense new orders for capital goods dropped 8.3 percent to $71.8 billion.

Defense new orders for capital goods rose 6.7 percent to $8.2 billion.

“While a modest decrease was to be expected in business equipment spending after two consecutive monthly increases in March and April, the May durable goods report indicates that business decision makers remain uncertain about the short-term prospects for U.S. economic growth,” said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI.  “This uncertainty appears to be especially pronounced in the manufacturing sector given the pullback in demand for key capital and material inputs such as primary and fabricated metals as well as machinery.  A number of domestic headwinds are preventing a full recovery in capital investment.  Market interest rates are rising, the Federal Reserve remains concerned about inflation, profit margins appear to be narrowing, and the housing slump appears to be deeper and longer lived than recently expected. 

“Strong global demand should generate enough strength in export markets to allow for modest economic and manufacturing growth,” he added.  “But, particularly in the factory sector, growth for the balance of 2007 and early 2008 will be more sluggish and uncertain than in past years.”

More in Operations