- Bank of America Merrill Lynch
Orders to American factories for big-ticket items rose more than expected in June, while business investment recovered after two months of drops. Durable goods orders surged 3.4% in June from the previous month, when orders had declined 2.1%, according to the Commerce Department. May's reading, meanwhile, was revised to show even sharper decline of 2.2%, compared with the original 1.8% decrease. At the same time, core durable goods orders, which exclude volatile category of transportation goods, were up 0.8% in June, the best showing in 10 months. The highly-watched bookings for non-defence capital goods excluding aircrafts, viewed as a proxy for business investment plans, jumped 0.9%, also the best showing since March.
US manufacturers have struggled this year from the effects of a strong Dollar and a sharp decline in energy prices. The higher value of the Greenback versus other currencies makes US goods more expensive and less competitive in major export markets, while the lower oil prices have led energy companies to scale back investment plans. The overall economy shrank at an annual rate of 0.2% in the January-March quarter. Weakness was likely due to a number of temporary factors including a harsh winter. The economy is expected to rebound to around 2.5% in the second quarter. The government will release its first estimate of GDP growth on Thursday.
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