Strong Durable Goods Orders Lift U.S. Growth Outlook

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Inside a Best Buy Store Ahead Of Durable Good Orders Data
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By Lucia Mutikani

WASHINGTON -- Orders for long-lasting U.S. manufactured goods rose more than expected in March and a measure of business capital spending plans surged, bolstering views of an acceleration in growth in the second quarter.

The Commerce Department said Thursday durable goods orders increased 2.6 percent as demand rose across all categories. Durable goods, which range from toasters to aircraft and are meant to last three years and more, increased 2.1 percent in February.

Economists polled by Reuters had forecast orders rising 2 percent last month.

U.S. Treasury debt prices extended losses on the data, while the dollar rose against the euro.

%VIRTUAL-article-sponsoredlinks%The report fit in with other data such as industrial production, retail sales and employment, that have suggested the economy gained steam after a troubled first quarter.

Growth in the first three months of the year is forecast to have braked sharply, because of an abnormally cold winter and an inventory overhang from last year that forced businesses to place fewer orders for goods with manufacturers.

The end of long-term unemployment benefits and cuts to food stamps have also robbed the economy of momentum.

First-quarter gross domestic product growth is estimated around a 1.5 percent annual rate. The economy grew at a 2.6 percent rate in the fourth quarter.

The durable goods report showed non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 2.2 percent in March after falling 1.1 percent the prior month.

Economists had expected orders for these so-called core capital goods to increase 1.5 percent last month.

Core capital goods shipments rose 1 percent last month. Shipments of core capital goods are used to calculate equipment spending in the government's GDP measurement. They had increased 0.7 percent in February.

Jobless Claims Rise

A separate report from the Labor Department showed initial claims for state unemployment benefits rose 24,000 to a seasonally adjusted 329,000 for the week ended April 19.

The second straight week of gains, which exceeded economists' expectations for a rise only to 310,000, probably reflected difficulties adjusting the data for seasonal fluctuations given a late Easter this year.

"It's largely reflective of the effect from the Easter holiday. We are not that concerned," said Sam Bullard, senior economist at Wells Fargo Securities in Charlotte, North Carolina. "[Claims] have been on a declining track since December and consistent with the employment gains we have seen," he added.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, rose only 4,750 to 316,750. That was not too far from pre-recession levels.

The number of Americans still receiving benefits after an initial week of aid in the week ended April 12 was the lowest since December 2007. That period covered the household survey week from which the unemployment rate is calculated.

The decline suggests the unemployment rate could fall in April from 6.7 percent in March.

The durable goods report showed orders for transportation equipment increased 4 percent last month. That reflected a surge in civilian aircraft orders after Boeing orders more than doubled in March to 163.

Orders for motor vehicles rose 0.4 percent after gaining 4.3 percent the prior month. Orders excluding transportation increased 2 percent, the largest rise since January last year.

There were gains in orders for machinery, fabricated metal products and electrical equipment, appliances and components. Orders for computers and electronic products recorded their largest increase since November 2010.

-Additional reporting by Richard Leong in New York.

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Strong Durable Goods Orders Lift U.S. Growth Outlook
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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