Durable Goods Increase 3.4% in June

Orders for business equipment rose in June for just the second time this year as U.S. factories start to regain their footing after a weak spell.

Bookings for non-military capital goods excluding aircraft climbed 0.9% last month after decreasing 0.4% in May, data from the Commerce Department showed July 27. Orders for all durable goods — items meant to last at least three years — increased 3.4%, propelled by a rebound in the volatile aircraft category.

Business investment is projected to improve as the energy industry adjusts to lower prices and companies look to expand.

‘We’re seeing domestic activity continue to push through, despite the headwinds of sluggish global growth and the strong U.S. dollar,’’ said Gregory Daco, head of U.S. macroeconomics at Oxford Economics USA Inc. in New York. “That should allow the economy to move forward at a decent pace,” he added.

Daco correctly projected the gain in total orders. The median forecast of 71 economists surveyed by Bloomberg News projected total durable goods orders would rise 3.2%.



The data were boosted by a 66.1% jump in bookings for non-military aircraft, according to the Commerce Department’s report.

Boeing Co., the Chicago-based aerospace company, said it received 161 orders for aircraft in June, a surge from 11 in the prior month. Deliveries also climbed, to 71 from 60 that the company shipped in May.

Excluding transportation equipment, orders rose 0.8%, the biggest gain since August. They were projected to increase 0.5%, according to the Bloomberg survey median.

Orders for non-defense capital goods excluding aircraft are a proxy for future business investment in items such as computers, engines and communications gear.

Shipments of those goods, used in calculating gross domestic product, fell 0.1% last month and the prior reading was revised to show a 0.3% drop that was larger than previously estimated. The figures indicate that business investment and/or exports remained weak last quarter.

The commodities market poses a challenge. Oil prices have been swept up in a broad selloff of raw materials, which have fallen to a 13-year low over concerns that economic growth will stagnate in China, the biggest consumer of energy, metals and grains.

Even with recent setbacks, the past few months have shown signs of a letup from the global plunge in crude prices that had triggered cutbacks in investment since mid-2014.

The drop in the fabrication of oil-drilling equipment is abating, and factories are producing more communications gear and other business equipment, recent Federal Reserve data showed. Total industrial output rose 0.3% in June, propelled by advances in mining and utilities.

Automobile demand, while slower in the latest monthly results, remains an encouraging spot for the durable goods industry. Sales of cars and light trucks sold at a 17.1 million annualized rate in June after 17.7 million in May, according to Ward’s Automotive Group. It capped the strongest quarter since 2005.

Consumer purchases, which account for about 70% of the economy, are getting a boost from progress in the job market. Employers added 223,000 workers to payrolls in June, and the unemployment rate fell to the lowest level in more than seven years.