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Durable Goods Orders Increase

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Durable Goods Orders Increase

Durable Goods Orders Increase

Aug 27 2015, 06.46am GMT


The United States economy seems to be on a roll despite the various international headwinds that have disrupted markets globally. The U.S. Commerce Department reported on Wednesday that the demand for durable goods, articles that are expected to last for at least three years or more, grew by a seasonally adjusted 2% in July.

Analysts had forecast a drop of 0.4%, according to data firm FactSet.

The number was boosted by orders for large military hardware including items such as armored vehicles, missiles and fighter jets, which increased by 22.3% for July. Vehicle orders, cars and trucks, showed an increase of 4%.

Pulling the average lower was the fact that orders for large commercial aircrafts, such as those manufactured by Boeing (BA, +3.07%), decreased by 6% for the month.

Excluding transportation related products, such as autos, aircrafts and military hardware, the increase in durable goods orders is a more modest 0.6%.

Providing further evidence of resurgence in the U.S. economy, orders for capital equipment, excluding transportation and defense needs and which provide an indicator for new business investment, increased by 2.2%. This marked the highest rate of growth for that indicator in 13 months. The figure for June had been at 1.4% after negative numbers for the four preceding months.

A damper on the report comes from the overall business investment number showing a drop of 3.8% year-on-year as manufacturers find it increasingly difficult to sell U.S. goods abroad. The dollar strength has made U.S. exports more expensive and less competitive in the local currencies of the importers while a weak global economy has also depressed order levels.

A measure of the decline in Chinese growth and its effect on the U.S. economy are evident in export numbers. United States exports to China for the first half of 2015 averaged $9,317.1 million monthly compared to 9,756.3 million monthly for the same period in 2014. Significantly imports from China averaged $37,778.6 million monthly for January to June 2015 against $30,575.6 million in the first half of 2014. These figures are according to the U.S. Census Bureau.

Meanwhile, Unites States oil producers have scaled back on the number of rigs in a response to the low oil prices and global oversupply of crude. This in turn has led to a reduction in orders for oil drilling and associated equipment.

Shipments of core capital goods, another measure used to determine quarterly economic growth, increased by 0.6%. Growth in the GDP for the second quarter which was at 2.3% looks set to be revised upwards when the review of the second quarter comes out later on Thursday.

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