Led by a big drop in orders for aircraft, U.S.-made durable goods fell 0.3% in May, the second decline in a row, the Commerce Department said Friday.
Orders have been up and down for the past few months.
Cause for concern? Apparently not.
"Underlying trends, however, remain solid," said Joshua Shapiro, chief economist for MFR."The outlook for capital spending remains positive," said Bart Melek, an economist for BMO Nesbitt Burns.
How can that be? The answer, from Reuters:
Excluding transportation, The Commerce Department said durable goods orders -- items meant to last three years or more -- rose 0.7 percent, slightly more than the 0.6 percent rise economists had forecast...
"I would look past the fact that orders declined and point to ex-transportation, which was up," said Ken Mayland, president of Clearview Economics LLC in Pepper Pike, Ohio. "Manufacturing continues to be in darn good shape. Business is good in manufacturing."
Sure enough:
And there is more. Back to MarketWatch:
Morgan Stanley economists David Greenlaw and Ted Wieseman said their firm cut its forecast for second-quarter gross domestic product to 2.5% from 2.8% based on the lower trajectory for capital spending seen in shipments for core capital equipment."Despite the likely slowdown in capital spending in the second quarter, forward-looking indicators in this report point to a significant pickup in future months," said Greenlaw and Wieseman said in a note.
One of those forward-looking indicators is unfilled orders, which continue to expand rapidly. More Reuters, via msn Money:
In a potentially positive sign for future production, unfilled orders for durable goods rose 0.6 percent after a 1.5 percent increase in April, to the highest level since the data have been gathered in current form beginning in 1992. Unfilled orders have climbed in 12 of the last 13 months.
The proof, in a picture:
OK, so not everyone was thrilled with today's report. Once more from MarketWatch...
"Although the pipeline is full, productive capacity is already stretched thin and with the economy set to cool further, it is unlikely that production will be ramped up in the second half of the year," said economists at Moody's Economy.com. "The risk of excessive inventory levels is becoming more palpable."
... and from msn Money:
"The headline number was a negative surprise, there's just no getting around that, and you had a downward revision the previous month," said Michael Woolfolk, currency strategist at the Bank of New York. "Leading indicators yesterday suggest a slowing of the economy over the next three to six months, and this report fits in line with that."
But much of the commentary waxed hopeful, as in this take, from the Wall Street Journal:
"The strength of investment spending is good news for the durability of this expansion, with consumers facing increasing pressures from a slowing housing market and high gasoline prices," wrote Nigel Gault, U.S. economist at Global Insight, a Waltham, Mass., consulting company. "Businesses can help to keep growth going even as consumer spending and residential construction slow."
Here's hoping.