U.S. durable-goods orders climb for third month in a row but manufacturing slump may not be over

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The numbers: Orders for manufactured U.S. goods jumped 1.7% in May and rose for the third month in a row, boosted by strong demand for passenger planes and new autos. Business investment also rose.

The recent increase in orders might be a sign that manufacturers have found a bottom, at least temporarily, after slumping in 2022. Orders rise in an expanding economy and shrink in a contracting one.

Economists polled by the Wall Street Journal had forecast a 0.9% decline.

Orders rose a more modest 0.6% if transportation is excluded, the government said Tuesday. The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production.

Durable goods are items meant to last a long time.

Key details: New orders for passenger planes have caused big swings in the durable-goods report this year. They did again, surging 33% in May, and offsetting a 35% drop in contracts for military aircraft.

Orders for new autos also rose a strong 2.2% last month after being flat in April.

Stripping out planes and cars, most major industrial sectors showed positive gains in May.

A key measure of business investment, meanwhile, increased 0.7% and rose for the second straight month.

These so-called core orders are up just 2% in the past year, however, and underscore a big slowdown in business investment since the end of 2021 as higher interest rates began to take their toll.

Companies invest less when they expect the economy to soften.

Big picture: The industrial side of the economy is just muddling along.

Higher interest rates have dampened demand for expensive manufactured goods and consumers have shifted more of their spending to services such as travel.

The trend is unlikely to change soon. The Federal Reserve might also raise interest rates again, giving manufacturers little reason to hire more or boost production.

Looking ahead: “Businesses are showing caution amidst higher interest rates,” said economist Katherine Judge of CIBC Economics.

Market reaction: The Dow Jones Industrial Average
and S&P 500
were set to open mixed in Tuesday trades.

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