U.S. durable goods surge on transportation, but business spending weak

[May 26, 2016]  WASHINGTON (Reuters - Orders for long-lasting U.S. manufactured goods surged in April on strong demand for transportation equipment and a range of other products, but continued weakness in business spending plans suggested the manufacturing rout was far from over.

The Commerce Department said on Thursday orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, jumped 3.4 percent last month after an upwardly revised 1.9 percent increase in March.

Durable goods orders were previously reported to have risen 1.3 percent in March.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, fell 0.8 percent after an upwardly revised 0.1 percent drop the prior month. These so-called core capital goods orders have now declined for three consecutive months. They were previously reported to have declined 0.8 percent in March.

Economists polled by Reuters had forecast durable goods orders rising 0.5 percent last month and core capital goods orders increasing 0.4 percent.

Manufacturing, which accounts for 12 percent of the economy, is struggling with the lingering effects of the dollar's past surge and sluggish overseas demand.

Spending cuts on capital projects by oilfield service firms like Schlumberger <SLB.N> and Halliburton <HAL.N>, whose profits have been hurt by the recent oil price plunge, and efforts by businesses to reduce an inventory bloat are also a drag.

Still, the rise in durable orders last month was another signal that the economy was gaining steam after growth braked to a 0.5 percent annualized rate in the first quarter.

So far, reports on retail sales, housing and industrial production have offered a favorable view of the economy at the start of the second quarter.

The rise in durable goods orders last month was led by an 8.9 percent jump in bookings for transportation equipment.

Orders for civilian aircraft soared 64.9 percent. Orders for motor vehicles and parts increased 2.9 percent.

There were increases in orders for fabricated metal products, computers and electronic goods, and electrical equipment, appliances and components. Orders for machinery fell 1.9 percent and demand for primary metals was unchanged.

Shipments of core capital goods - used to calculate equipment spending in the gross domestic product report - rose 0.3 percent, reversing March's 0.3 percent drop.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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