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Durable Goods Signal Moderate Economy but Weaker Future

Posted by Joseph Trevisani on May 24, 2013 9:49:00 AM

Orders for durable goods rose more than predicted in April, led by investment demand from factories and manufacturers. 

Placements for goods designed to last more than three years, a category encompassing everything from scissors to jet airplanes, increased 3.3 percent after a 5.9 percent drop in March, according to the Commerce Department in Washington, D.C. Analysts surveyed by Reuters and Bloomberg has projected a 1.5 percent increase.

Excluding transportation orders, primarily civilian aircraft with the Boeing Company of Chicago, bookings rose 1.3 percent on expectations for a 0.5 percent gain. Orders had fallen 1.7 percent in March.  Orders in the factory sector also called core capital goods, which eliminate military items and aircraft and is used as a proxy for overall business investment, rose 1.2 percent, better than expected. 

However, when the Commerce Department calculates gross domestic product it uses shipments of core capital goods, rather than orders and these fell 1.5 percent in April. In the first quarter GDP expanded at a 2.5 percent annual pace. The shipment figure indicates that business spending got off to a slow start in the second quarter, and that will support expectations that economic growth has diminished in the second quarter.

Joseph Trevisani 

Chief Market Strategist

WorldWideMarkets

 Chart: FX Street

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