Wednesday, May 28, 2008

Durable Goods Orders

Orders for durable goods declined 0.5% in April, much better than expected, as orders for electronics offset a sharp drop in transportation orders. Economists were expecting a decline of 2.8% for the month. It is the second straight monthly decline, but, because of the report, some economists were quickly questioning if the U.S. economy would experience a recession.

Analysts had forecast a weak performance in April because there would be fewer orders for transportation equipment as a result of the high cost of oil. As predicted, transportation orders fell 8.0% in April, with aircraft orders falling by 24.4%.

But what they didn't expect was a record 27.8% gain in orders for electrical equipment, appliances and components, which rebounded after an 18.9% drop in March. Orders excluding transportation rose 2.5% in April, the biggest gain since last July.

Orders for core capital equipment rose 4.2% in April, the biggest increase since December. Core capital equipment orders, which exclude aircraft and non-defense goods, are the best monthly indicator of capital expenditures.

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