Durable-goods orders get a boost from military spending

[ad_1]

The numbers: Orders for U.S. manufactured goods jumped 1.1% in April largely because of the military, but business investment also rose sharply in a positive sign for the economy.

Economists polled by the Wall Street Journal had forecast a 0.8% decline. Durable goods are items meant to last a long time.

Yet orders fell 0.2% if transportation is excluded, the government said Friday. The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production.

The pace of orders has slowed sharply over the past year and is now just slightly positive. Orders rise in an expanding economy and shrink in a contracting one.

In a good sign, business investment rose a sharp 1.4% after a string of weak readings. Companies invest more when they expect the economy to improve, but it remains to be seen if it’s the blip or the start of a trend.

Big picture: The industrial side of the economy has largely been sidelined by rising interest rates and a shift in consumer spending away from manufactured goods.

What has kept the economy afloat is an increase in spending on services such as travel, recreation and hospitality.

The divide in the economy is likely to persist for while and leave the U.S. more susceptible to a recession.

Looking ahead: “Durable goods spending will continue to get a lift from pent-up demand for autos,” said Ryan Sweet, chief U.S. economist at Oxford Economics.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.60%

and S&P 500
SPX,
+0.60%

rose in Friday trades.

[ad_2]

Source link