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Associated Press
An assembly line worker works on a 2015 Chrysler 200 in Sterling Heights, Mich. The Commerce Department announced orders for durable goods rose 0.7% in June after falling 1% in May.

Durable-goods orders rise

Gain 0.7% in June after falling in May; analysts expect strong 2nd half

Orders for long-lasting manufactured goods rebounded in June after a May decline, helped by a recovery in demand in a key category that signals business investment plans.

Orders for durable goods increased 0.7 percent in June on a seasonally adjusted basis after a 1 percent decline in May, the Commerce Department reported Friday.

A category viewed as a proxy for business investment plans rose a solid 1.4 percent, recovering after a revised 1.2 percent drop in May. It was the best showing since orders in this core capital goods category rose 4.7 percent in March.

The strength last month came from solid gains in demand for commercial aircraft and machinery. Analysts expect economic activity will strengthen in the second half of the year, helped by stronger factory production.

The 0.7 percent overall increase was in line with economists’ expectations and pushed total orders to $239.9 billion. So far this year, orders are up 3.5 percent over the same period last year.

Analysts were encouraged by the solid rebound in June, saying it should set the stage for further growth in coming months.

“June’s strong orders data and other survey evidence suggest that business investment will continue to grow at a decent rate in the second half of the year,” said Paul Dales, senior U.S. economist at Capital Economics. He said he expects growth would rebound to 3.2 percent in the April-June quarter.

Demand for transportation products rose 0.6 percent, reflecting a big 8.2 percent gain in orders for commercial aircraft which offset a 2.1 percent drop in demand for motor vehicles. The drop in auto demand was expected to be temporary given strong sales of new cars this year.

Orders for machinery rose 2.4 percent while demand for primary metals such as steel increased 0.9 percent.

Orders for computers and related products dropped 13.9 percent but that followed a big 11.5 percent increase in the previous month.

The overall economy went into reverse in the January-March quarter, with output shrinking at an annual rate of 2.9 percent. That reflected in part a severe winter that disrupted U.S. economic activity, from factory production to shopping.

Many economists believe growth rebounded to a rate around 3 percent in the April-June quarter and they are looking for momentum to build even more in the second half of this year.

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