Aircraft demand spurs record gain in U.S. durable goods orders

WASHINGTON Tue Aug 26, 2014 12:12pm EDT

A woman walks by stoves in the appliance section at a Sears store in Schaumburg, Illinois near Chicago, September 23, 2013. REUTERS/Jim Young

A woman walks by stoves in the appliance section at a Sears store in Schaumburg, Illinois near Chicago, September 23, 2013.

Credit: Reuters/Jim Young

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WASHINGTON (Reuters) - Orders for long-lasting U.S. manufactured goods posted their biggest gain on record in July on strong overseas demand for aircraft, and the underlying trend also remained firm, pointing to brisk economic growth.

Durable goods orders, items ranging from toasters to aircraft that are meant to last three years or more, jumped 22.6 percent last month after an upwardly revised 2.7 percent increase in June, the Commerce Department said on Tuesday.

Transportation orders rose a record 74.2 percent as bookings for civilian aircraft more than tripled. Boeing (BA.N) had said earlier it received a record 324 aircraft orders in July. At the same time, orders for autos logged the biggest gain in five years.

Outside of transportation, demand was decidedly softer. Still, upward revisions to the data for June as well as a pick-up in business investment plans, shipments and order backlogs suggested a strong underpinning for growth.

"This report reinforces the message that manufacturing growth is picking up and is likely to support stronger GDP growth in the second half of the year," said John Ryding, chief economist at RDQ Economics in New York.U.S. stocks traded higher, with the Dow Jones industrial average .DJI reaching an all-time intraday high, with Boeing shares up 0.4 percent. Prices for U.S. Treasury debt rose, while the dollar was flat against a basket of currencies. Helping bolster investors' spirits, the Conference Board said consumer confidence hit its highest level in nearly seven years in August. A gauge of households' perceptions of the labor market touched its best level since July 2008.

A separate report, however, showed house price growth continued to slow in June. The S&P/Case Shiller's national house price index rose 6.2 percent from a year ago, the smallest gain since November 2012 and down from a 7 percent rise in May.

The housing sector cooled abruptly last year as mortgage rates moved higher, with a lack of supply also crimping sales. Economists think slower price appreciation will help keep the housing recovery on the rails.

STRONG AUTO ORDERS

Many of the Boeing orders, including 150 planes by the Dubai-based airline Emirates EMIRA.UL, were for a new version of its top-selling twin-aisle 777 jet, which is still under development and sells for about $377 million at list price.

The aircraft is due for delivery in 2020. It will take at least 10 years for the resulting increase in production from the orders, which also included the Dreamliner jet, to filter through to U.S. gross domestic product.

The report on durable goods orders showed demand for non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, slipped 0.5 percent in July.

But the decline followed an upwardly revised 5.4 percent advance in June and bolstered perceptions that business spending is rising. These core capital goods orders were previously reported to have increased 3.3 percent in June.

Shipments of these goods, which are used to calculate equipment spending in the government's GDP measurement, increased 1.5 percent last month, helping to prompt Morgan Stanley to raise its third-quarter growth estimate by five-tenths of a percentage point to a 3.5 percent annual rate. Barclays lifted its estimate by 0.3 percentage points to 2.7 percent.

Unfilled orders for core capital goods increased 1.1 percent last month after rising 1.7 percent in June, showing a steady pipeline of work that will keep the nation's factories humming.

"There is plenty of gas in the tank for continued growth in business spending," said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, North Carolina.

(Reporting by Lucia Mutikani, additional reporting by Alwyn Scott, Sam Forgione and David Gaffen in New York; Editing by Tim Ahmann and Paul Simao)

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Comments (14)
USAPragmatist wrote:
Where are all the righties/Obama haters saying how this is not good news, but bad news and/or ‘government manipulation’?

‘after an upwardly revised 2.7 percent increase in June.’ I thought according to these same rightie/Obama haters the numbers are always revised down later?

Aug 26, 2014 10:45am EDT  --  Report as abuse
AlkalineState wrote:
“record gain in U.S. durable goods orders”

It’s a conspiracy! Benghazi! Muslim! Obama is bad!

Aug 26, 2014 11:21am EDT  --  Report as abuse
BeRealistic wrote:
“…on strong international demand for aircraft, but the underlying trend remained consistent with a steady pace of domestic economic growth.” – Ok, so what part of international demand signals healthy domestic economic growth? While I am happy to hear we have workers making stuff, it would be nice if they were making things for the average American to buy because those same people had discretionary spending ability. How long does aircraft demand last? It is highly cyclical. “U.S. financial markets were little moved by the data.” – Because people know this is really meaningless hype.

“durable goods orders fell 0.8 percent after rising 3.0 percent in June.”

“Non-defense capital goods orders excluding aircraft, … slipped 0.5 percent last month.”

“Durable goods inventories rose 0.5 percent in July, matching the gain in the prior month.” – more stockpiling of unsellable stuff.

Aug 26, 2014 11:54am EDT  --  Report as abuse
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