Manufacturers Continue To Show Signs of Rebound
May 05, 2011
Vastopolis -- New factory orders for durable goods rose a much-stronger-than-expected 1.6% to a new high in July, the Commerce Department said Friday, deflating expectations for a slowing economy. Analysts had predicted an increase of just 0.5% in orders for durable goods, which are big-ticket items made to last at least three years. The full text of the Commerce Department's report on durable-goods orders is available. Treasury prices declined throughout the day, beginning with a sharp drop just before the data was released. In late-afternoon trading, the price of the benchmark 30-year bond was down 1 1/4, or $12.50 for a bond with a face value of $1,000. The yield, which moves in the opposite direction from the price, was at 6.94%, up from 6.84% late Thursday. Bond traders fear the rise in inflation that often accompanies strength in the economy, since inflation decreases the value of fixed-income holdings such as bonds. The July increase, however, was tempered by a decrease in defense orders and flat orders for transportation. And some economists said the numbers were basically in line with expectations, given the volatile nature in the series. ``I think a lot of people looked at the July data that have come out so far -- retail sales, housing activity and so on -- and concluded that the economic growth rate slowed dramatically from the second quarter's 4.2% rate,'' said Raylene Eddy, chief economist at A.G. Edwards & Sons in St. Louis. ``But what we saw in the weekly retail numbers and these durable goods numbers suggests there's life in the old economy yet.'' The gain in durable goods orders was sparked by increases in orders for industrial machinery, primary metals and electronics and other equipment. Orders for industrial machinery rose by 2.1% in July after rising by 0.2% in June. Orders for primary metals rose 2.1% after falling 0.7% in June, while orders for electronics equipment rose by 4.7% after increasing by 3.9% a month earlier. Commerce said orders for communications equipment contributed to most of the increase in electronics equipment. The report contained few major surprises, although economists said a 36.5% plunge in defense capital goods orders was notable, coming on the heels of a 26.4% rise in June. Orders excluding defense rose by 3.5% after a drop of 1.2% in the previous month. Durable goods, excluding transportation, rose 2.1% in July after rising by 0.2% in June. Orders for transportation equipment were unchanged in July after falling by 1.2% the previous month. The Commerce Department said a large decline in shipbuilding and tanks more than offset an increase in motor vehicles and parts. New orders for nondefense capital goods, considered a barometer of future plant and equipment spending, rose 7.2% in July after falling by 4.6% in June. Durable-goods shipments last month rose 0.7% after falling by 0.4% the previous month. The backlog of orders in July rose by 1.0% after rising by 0.7% in June. ``It's a fairly good reading, not troublesome,'' Arvilla Odle, associate economist at Daiwa Securities America Inc., said of the durable-goods report. ``It's a good number for the economy,'' he said, but won't, by itself change the Federal Reserve's monetary stance.
