"This report is consistent with the economy continuing to recover, but just at a moderate pace"
- Scott Brown, chief economist at Raymond James & Associates Inc.
Orders for long-lasting products in the world's largest economy surged more than initially was expected, a sign of resilience in the factory sector even despite budget cuts, tax hikes and weakness in overseas markets. On Friday the Commerce Department said durable goods orders, which range from toasters to aircraft, jumped 3.3% last month, exceeding experts' expectations of a 1.6% gain and recovering from a 6.9% contraction in a month earlier. Stripping out the volatile transportation sector, orders rose a smaller 1.3%, but still better than a 1.5% drop in a prior month.
However, shipments of these core capital goods, which go into calculations of equipment and software spending in the economic output report, tumbled 1.5%. A drop suggests business spending got off to a weak start in the middle of a year, and could even reinforce expectations that economic growth will slow during the period and quantitative easing will take place for a longer time.
The U.S. economy has proved that it is almost invulnerable to belt-tightening in Washington. The government hiked taxes in January and 2 months later enacted sweeping budget cuts. At the same time, analysts expect the austerity will limit the pace of recovery as the year progresses. In April, shipments for capital goods in the defence sector tumbled 5.6%.
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