-David Sloan, senior economist at 4Cast Inc.
Orders placed with US factories for long-lasting manufactured goods dropped in May, led by a precipitous decline in demand for aircraft. According to the Commerce Department, total orders for durable goods plunged 1.8% in the reported month following the 1.5% decrease in April, which was also caused by the 35.3% dip in orders for aircraft. However, core durable goods orders, which exclude volatile transportation component, rose 0.5%. A key category that measures business investment plans, orders for non-military capital goods excluding aircraft, climbed 0.4% in May, reversing a 0.3% decline in April. Shipments of core capital goods, a category used to determine quarterly economic growth, rose 0.3% in May to mark the third consecutive increase. The May durable goods numbers are an advance report, which will be a subject to revision when the full report on factory activity is released next week. Last month the full data delivered sizable downgrades to the key capex components.
American factories have struggled this year partly due to a strong Greenback that has made US goods more expensive abroad. Lower oil prices also mean energy firms are purchasing less equipment. So far this year, durable goods orders are down 2.2% from January-May 2014. The category that tracks business investment is down 2.6% through May this year.
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