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    Durable Goods Order and Business Spending Rise, Trend Remains Weak

    Orders for durable goods rose for the first time in three months in June and business equipment purchases gained for the second time this year as the economy struggles to shake off the effects of the first quarter's contraction in GDP.

    Booking for manufactured goods designed to last three years or more climbed 3.4 percent. Those for non-military capital goods excluding aircraft also called 'core capital goods' were 0.9 percent higher. Analyst’s predictions were for 3.2 percent and 0.5 percent gains respectively.

    Goods orders minus the transportation sector, in practice largely aircraft orders for Boeing Company of Chicago, rose 0.8 percent in June on expectation for a 0.5 percent gain. Boeing reported 161 new aircraft orders in June up from 11 in May. 

    The May results for all three sectors lost ground with revision. Overall durable goods orders fell to -2.1 percent from-1.8 percent. The ex-transport group was downgraded to -0.1 percent from 0.5 percent.  

    In a blow to the idea of a reviving business sector leading the economy, May’s 'core capital goods' result became sharply negative at -0.4 percent from the initial reading of 0.4 percent.  May was the fifth negative month in a row for this closely observed barometer of U.S. business spending.

    Capital goods shipments, a component of the Commerce Department’s GDP calculation were unexpectedly down in June, shrinking 0.1 percent and missing the 0.6 percent forecast by a wide margin. The May reading also reversed after adjustment dropping to -0.3 percent from the original 0.3 percent. Business equipment deliveries have contracted in two of three moths in the second quarter.  The were 1.2 percent higher in the 12 months to June. 

    Today's information arrived in front of Thursday's initial issue of second quarter GDP from the Commerce Department. Economists in the Bloomberg survey expect the economy to have grown at a 2.5 percent annual rate, recovering from its first-quarter contraction of 0.2 percent. 

    Over the past twelve months overall durable goods orders were 0.6 percent lower in June. Although this is improvement over May’s 5.9 percent drop, it was the third negative month in row and the fourth out of the last five.

    Annual orders for 'core capital goods' were down 5.2 percent last month, sliding from -3.6 percent in May. Business spending has fallen every month this year.


    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

    Charts: Bloomberg

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