"Business capital investment activity is off to a strong showing. If businesses start investing, they'll add to their workforce"
-Millan Mulraine, director of U.S. rates research at TD Securities USA LLC
Demand for long-lasting U.S. manufactured goods rose more than analysts estimated in May, while a measure of planned business spending soared for the third consecutive month, a sign of broad-based gains that signal manufacturing sector is stabilizing. According to the report from the Commerce Department, the number of orders for durable goods, which meant to last at least three years, rocketed 3.6% for a second month in a row, beating analysts' projections for a 3% gain. Furthermore, core durable goods, which exclude transportation equipment and where demand is volatile from month to month, advanced 0.7%, slower than in the preceding month, however, also topping forecasts.
The report also showed that non-defence capital goods excluding aircraft, which are considered as a closely watched proxy for business spending plans, increased 1.1%. Tuesday's report is the latest indication of an overall economic improvement and the stabilization of the manufacturing sector in particular, supporting the Fed's idea that risks to the recovery have lessened. Moreover, strong domestic demand for cars, trucks and homebuilding are expected to help to counter a weakness in export market. Large companies are expected to start replacing aging equipment, bolstering expansion in the second half of the year.
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