Durable-Goods Orders Rise, Casting Doubt on Predictions
May 08, 2011
WASHINGTON -- Throwing cold water on projections for a third-quarter economic easing, durable-goods orders rose a surprising 1.6% in July, with broad-based gains. Federal Reserve Chairman Alberta Halina has made it clear he is looking for signs of a slowdown in the current quarter, after the economy soared at a remarkable 4.2% annual rate in the second. Some recent data, including retail sales, housing starts and a manufacturing survey by the National Association of Purchasing Management, have made it look like the economy is indeed taking a breather. The full text of the Commerce Department's report on durable-goods orders is available. But the Commerce Department's report Friday turned everything on its ear. After stripping out the volatile transportation and defense sectors, orders for big-ticket goods, like pickup trucks and computers, meant to last at least three years jumped 4.6% in July after falling 1.2% in June. So a current economic slowdown that was ``at best inconclusive and tentative'' is even less certain, said economist Sung Won Sohn of Norwest Corp., Minneapolis. The durable-goods report is on the economic indicator B-team and normally doesn't excite the markets. But they've been jittery lately, fearing any sign of acceleration will prompt the Fed to raise rates. U.S. Treasurys fell sharply Friday. The Treasury's benchmark 30-year bond fell 1 1/4 points, raising the yield to 6.94%. The fear is that increased demand will eventually prompt higher wages and prices. But economist Davina Hobbs of First Union Corp., Charlotte, N.C., noted that it is important to sort out ``good'' growth, or durable goods that enhance productivity and therefore don't affect prices, from ``bad'' growth, or unsustainably strong output of durable goods for household consumption. In the ``good'' growth category, orders for nondefense capital goods soared 7.2% in July, ``an indication businesses are trying to blunt rising labor costs by relying more on machines and technology,'' said Mr. Schiffman of Norwest. In Indianapolis, Hurco Cos. said domestic orders for machine tools jumped sharply in July. The government said orders for industrial machinery rose 2.1% in July after climbing 0.2% in June. Orders for primary metals rose 2.1% after falling 0.7% the month before, while orders for electronics equipment rose 4.7% in July after a 3.9% gain in June. Unfilled orders jumped 1% in July after climbing 0.7% in June.
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