Durable Goods Excluding Transport Rises Much More than Expected

(Bloomberg News — Bob Willis)

Orders for U.S. durable goods excluding cars and planes unexpectedly rose in April, signaling that international customers are helping factories ride out the economic slowdown.

Excluding transportation orders that tend to be volatile, bookings for goods meant to last several years rose 2.5 percent, the most since July, the Commerce Department said today in Washington. Total orders fell a less-than-forecast 0.5 percent.

Exports are keeping the economy from shrinking as American manufacturers grapple with the slowest economic growth in seven years and oil costs that have doubled in the past 12 months. Dow Chemical Co., the largest U.S. chemical maker and a producer of plastics and fluids for the global automotive industry, said today that surging expenses mean it will raise prices by as much as 20 percent.

Economists forecast orders would decline 1.5 percent, according to the median of 72 projections in a Bloomberg News survey. Estimates ranged from a drop of 5 percent to a gain of 0.6 percent.

Excluding transportation equipment, orders were projected to drop 0.5 percent, after a previously reported 1.5 percent gain for March, according to a Bloomberg News survey. Forecasts ranged from a decline of 1.5 percent to a gain of 0.8 percent.

A rebound in demand for electrical equipment and appliances, along with gains in machinery and metals, paced the increase. Orders for electrical equipment jumped a record 28 percent after falling 19 percent in March.

Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, climbed 4.2 percent, the most this year. Shipments of those items, a number used in calculating gross domestic product, increased 0.5 percent.

Among the biggest costs to manufacturers, oil rose to more than $135 a barrel last week, the highest ever.

Still, manufacturing has done better than in past downturns. While the Institute for Supply Management's factory index fell to a five-year low of 48.3 in February and moved up to 48.6 in the following two months, it was still well above the 42.1 reading reached in February 2001, a month before the start of the 2001 recession. A figure of 50 is the dividing line between growth and contraction.

Companies that export have continued to grow during the current slowdown in growth. A shrinking trade gap added 0.2 percentage point to first-quarter economic growth, according to Commerce Department figures. Read the full article here.