BUSINESS

Orders to US factories for durable goods slip 0.5 per cent, but investment category shows gain

05/26/2015 09:07 EDT | Updated 05/26/2016 05:59 EDT
WASHINGTON - Orders to U.S. factories for long-lasting manufactured goods fell slightly in April. But a category that reflects business investment climbed for a second month, a hopeful sign that this key sector is starting to revive.

Total orders for durable goods slipped 0.5 per cent from March, when orders had surged 5.1 per cent, the Commerce Department reported Tuesday. The big swing was driven by changes in commercial aircraft, an extremely volatile category that had jumped in March but fell in April.

Orders in the business investment category rose 1 per cent in April after a 1.5 per cent increase in March. The gains followed a sizable 5.1 per cent fall in February. Business investment has been hurt by a stronger dollar sapping exports and cutbacks in the energy industry.

"The anticipated pick-up in the growth rate of business investment in equipment in the second quarter appears to be firmly on track," said Paul Ashworth, chief U.S. economist at Capital Economics.

He said the solid gain in orders for business investment indicated that the economy was starting to return to stronger growth following a severe winter in the Northeast at the beginning of the year and the West Coast port dispute, which disrupted supply chains.

Demand for commercial aircraft had surged 40.7 per cent in March only to fall 4 per cent in April. Orders for motor vehicles and parts rose a modest 0.3 per cent last month. Orders for durable goods excluding transportation posted a 0.5 per cent rise in the first back-to-back increase this year.

Orders for primary metals fell 2.1 per cent in April, and orders for computers dropped 3.4 per cent. But demand for machinery rose 3.1 per cent.

U.S. factories have been struggling with weak exports, which have been clipped by a big rise in the value of the dollar. A stronger dollar makes U.S. exports more expensive in overseas markets. It also lowers the cost of imported goods, making them more attractive for American consumers.

Business investment has suffered because of large cutbacks in the energy industry, which has reduced exploration in response to the drop over the past year in global oil prices.

The overall economy, as measured by the gross domestic product, grew at a meagre annual rate of 0.2 per cent in the January-March quarter, according to the government's first estimate. That figure will be revised on Friday, and many economists believe it will show that GDP actually contracted in the first three months of the year.

But economists expect a rebound in the April-June quarter, with many expecting growth to recover to a rate of 2 per cent or better.