Durable goods manufacturing, seen as a key indicator of market strength and business confidence in the economy, rose in May for the third consecutive month. This is the third time this sector has seen a three month straight increase in orders since the fall quarter of 2011. According to the report by the U.S. Commerce Department, durable goods rose 3.6 percent in May from the $231 billion mark of April.
Analysts only predicted a 3 percent rise for May, following the 3.6 percent increase in April. One of the primary drivers of this growth is an increase in orders in the airline industry, a key component of the transportation industry. However, rises were also seen in computers (which were up 1 percent), heavy machinery (which was up 1.2 percent), Primary metals (which was up .9 percent), and communications equipment (which was up 12.6 percent).
High priced items, such as airplanes, can raise the percentage more quickly than smaller ticket items, such as computers. Overall, transportation equipment was up $6.9 billion, a 51 percent increase over April’s sales. Excluding the expensive transportation equipment, durable goods sales were up .7 percent. Orders for aircraft can typically fluctuate drastically from month to month.
Analysts say this increase indicates businesses having more confidence in the economy. The news sparked optimism for a greater pickup of manufacturing for the second half of 2013, and should mean a strong growth for the quarter of July through September. U.S. manufacturing has struggled, largely due to the worldwide economic slump that has hindered demands for U.S. exports.
Some businesses are still wary of making investments in durable goods, in light of the deep federal spending cuts that began in March. The surge in durable goods is expected to last another three years, according to market analysts. A Durable good is defined as any item expected to last at least three years.
Global Procurement & Supply Chain Professionals Read This…
…Carefully curated procurement & supply chain issues that make you look smart, sent to your inbox every week.