BUSINESS

US durable goods orders edged up slight 0.2 per cent in April with business investment down

05/24/2012 08:57 EDT | Updated 07/24/2012 05:12 EDT
WASHINGTON - Orders for long-lasting factory goods edged up slightly in April. But a measure of tracks business investment spending fell for a second straight month.

Durable goods orders increased 0.2 per cent last month after a 3.7 per cent decline in March, the Commerce Department said Thursday. Gains in volatile commercial aircraft orders and more demand for autos and parts drove the modest increase.

So-called core capital goods orders, which are considered a proxy for business investment plans, fell 1.9 per cent in April after a 2.2 per cent decline in March. Demand for computers and electronics products and heavy machinery fell.

Durable goods are items expected to last at least three years. Orders rose in April to $215.5 billion, up 52.5 per cent from their recession low hit in the spring of 2009. Orders are still 11.6 per cent below their peak in December 2007.

The decline in core capital goods could suggest that second-quarter growth is off to a slow start. Still, orders tend to fluctuate sharply from month to month.

Many economists approached Thursday's report cautiously. They noted that the findings conflicted with two other reports that suggest factory activity and production grew last month.

The Institute for Supply Management said factory activity grew in April at the fastest pace in 10 months. The group's closely watched manufacturing index showed strength in new orders, production and hiring.

And the Federal Reserve reported that U.S. factory output rose 0.6 per cent in April. Half of that increase reflected a big jump in production of motor vehicles and parts.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said that the weakness could be the result of lingering effect of the expiration of favourable business investment tax breaks at the end of last year.

"This is disappointing, but given the volatility of the data and the strength of the ISM new orders in manufacturing, not disastrous," Shepherdson said.

Manufacturing has been a leading source of growth and jobs since the recession ended. Economists believe that trend will continue.

For April, orders for transportation goods rose 2.1 per cent, led by a 7.2 per cent increase in demand for commercial aircraft. This volatile category had plunged 46.6 per cent in March.

Orders for autos and auto parts rose 5.6 per cent, reflecting the continued strong demand automakers are seeing.

Excluding transportation, durable goods orders fell 0.6 per cent following a 0.8 per cent drop in March.

Orders for heavy machinery dropped 2.8 per cent, while demand for computers and other electronics products fell 0.6 per cent.