[WASHINGTON] Orders for long-lasting US manufactured goods rebounded sharply in May, boosted by a surge in commercial aircraft bookings, though economic uncertainty stemming from import tariffs remains a constraint for business spending on capital.
Orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, jumped 16.4 per cent last month after a revised 6.6 per cent decline in April, the Commerce Department’s Census Bureau said on Thursday (Jun 26).
Economists polled by Reuters had forecast orders increasing 8.5 per cent after a previously reported 6.3 per cent decrease in April.
Transportation equipment orders soared 48.3 per cent, driven by a 230.8 per cent surge in commercial aircraft orders, which are extremely volatile. Boeing reported on its website that it had received 303 aircraft orders, including 150 from Qatar Airways placed during President Donald Trump’s visit to the Gulf Arab country in May.
That compared with only eight orders in April.
Outside the transportation industry, orders were muted. Economists say Trump’s often shifting trade policy has left businesses in limbo while the duties already imposed have increased costs for companies.
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The Federal Reserve is also in a wait-and-see mode as policymakers monitor the economic fallout from the sweeping tariffs. Fed Chair Jerome Powell told lawmakers this week the US central bank needed more time to gauge if tariffs pushed up inflation before considering lowering rates.
The Fed last week left its benchmark overnight interest rate in the 4.25 per cent-4.50 per cent range where it has been since December.
Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 1.7 per cent in May after an upwardly revised 1.4 per cent decline in April.
Economists had forecast these so-called core capital goods orders edging up 0.1 per cent after a previously reported 1.5 per cent drop in April.
Shipments of core capital goods rose 0.5 per cent after being unchanged in the prior month. Non-defense capital goods orders accelerated 49.4 per cent after plunging 19.1 per cent in April. Shipments of these goods were unchanged after advancing 3.6 per cent in April.
Business spending on equipment accelerated sharply in the first quarter, helping to blunt some of the drag on gross domestic product from a flood of imports as businesses rushed to bring in merchandise before the tariffs came into effect.
The Atlanta Fed is forecasting economic growth rebounding at a 3.4 per cent annualised rate in the second quarter, largely reflecting a reversal in the import flows.
Data on retail sales, the housing and labour markets have suggested economic activity is softening. The economy contracted at a 0.5 per cent pace in the January-March quarter. REUTERS
