Durable Goods Orders Rise; Economy Seen Building Speed

By Lucia Mutikani

WASHINGTON -- Orders for long-lasting U.S. manufactured goods rose more than expected in June, pointing to momentum in the economy heading into the third quarter.

The Commerce Department said Friday durable goods orders increased 0.7 percent as demand increased from transportation to machinery and computers and electronic products.

The increase in orders for these goods, which range from toasters to aircraft that are meant to last three years or more, was above economists' expectations for a 0.5 percent rise and followed a 1 percent drop in May.

"This is consistent with broad, increasing demand throughout the economy," said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh.

%VIRTUAL-WSSCourseInline-956%Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 1.4 percent after declining 1.2 percent the prior month. The gain in the so-called core capital goods outpaced economists' expectations for only a 0.5 percent increase.

The signs of an improvement in business investment bode well for stronger economic growth in the second half of the year. The economy performed poorly in the first six months of 2013, hurt by an unusually cold winter.

While second-quarter growth is expected around a 3 percent annual pace, it will be just be enough to regain ground lost in the January- March period. The government will release its first snapshot of second-quarter GDP next Wednesday.

Core capital goods shipments fell 1 percent in June. Shipments of core capital goods are used to calculate equipment spending in the government's GDP measurement. Core capital goods fell 0.1 percent in May and were down in the second quarter, which suggests another quarterly decline in business spending.

Orders for transportation equipment rose 0.6 percent as an increase in bookings for civilian aircraft offset a 2.1 percent drop in orders for automobiles, which was the largest since December.

Unfilled orders increased 0.8 percent last month after rising 0.7 percent in May, showing a building up of backlogs that will keep the nation's factories busy for a while.

Durable goods inventories rose 0.4 percent. That supports views inventories would be a boost to second-quarter growth. A slow pace of inventory accumulation was behind the sharp contraction in output in the first quarter.