Just as Obama Prepares to Sell “Robust Economy,” This Bad News

By Reuters.

A gauge of planned U.S. business spending rose for a third straight month in June, offering a hopeful sign for a pickup in economic growth in the second half of the year.

Other data on Thursday showed first-time applications for unemployment benefits increased slightly last week, but the underlying trend pointed to continued job gains.

The Commerce Department said on Thursday that non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.7 percent after rising by a revised 2.2 percent in May.

Economists had expected this category to only rise 0.5 percent after a previously reported 1.5 percent gain in May.

Orders for long-lasting manufactured goods jumped 4.2 percent as demand for goods ranging from aircraft to machinery improved. Orders for these goods, which range from toasters to aircraft, had increased by a revised 5.2 percent in May.

Economists polled by Reuters had expected orders for durable goods to rise only 1.3 percent after a previously reported 3.7 percent increase the prior month.

The gains in both the so-called core capital goods and durable goods orders were consistent with other manufacturing data that have suggested factory activity is regaining some momentum after hitting a soft patch earlier this year.

The sustained gains bolstered expectations of a reacceleration in economic growth in the second half of the year.

“There is decent momentum suggesting the manufacturing sector continues to hold and contribute to economic growth in the second quarter and the beginning of the third quarter,” said Sam Bullard, senior economist with Wells Fargo Securities in Charlotte, North Carolina.

In a separate report, the Labor Department said initial claims for state unemployment benefits increased 7,000 to a seasonally adjusted 343,000 last week.

Claims tend to be volatile around this time of the year because motor vehicle assembly plants usually shut down for retooling. But many have either shortened the shutdown period or completely forgone the closure, throwing off the model that the government uses to adjust the data for seasonal variations.

Still, a four-week average of new claims, which irons out the week-to-week volatility, held at levels consistent with improving labor market conditions.

U.S. financial markets were little moved by the data.

Shipments of core capital goods – used to calculate equipment and software spending in the gross domestic product report, fell 0.9 percent last month. That followed a 1.9 percent increase in May and pointed to moderate growth in business spending on capital equipment in the second quarter.

Last month, demand for transportation equipment increased 12.8 percent, buoyed by a surge in orders for civilian aircraft.

Boeing received orders for 287 aircraft in June, adding to May’s 232 tally, according to information posted on its website. Orders for motor vehicles advanced 1.3 percent after falling 0.8 percent the prior month.

Orders excluding transportation were flat. There were gains in orders for machinery and fabricated metal products. However, orders for computers and electronic products, and electrical equipment, appliances and components fell.

Other details of the report also showed strength with unfilled orders rising by the most since December 2007. Unfilled orders for core capital goods rose a solid 1.7 percent. Total durable goods inventories were up only marginally.

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.

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