Durable goods orders rebound in May; GDP revised up

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WASHINGTON — Businesses boosted their orders for machinery, electronics products and airplanes in May. The pickup suggests manufacturing is rebounding after the Japan crises made parts scarce and slowed production of some factory goods temporarily.

Orders long-lasting manufactured products increased 1.9% in last month, the Commerce Department said Friday. A key category that signals business investment plans rose 1.6%.

The stronger demand follows a revised 2.7% decline in April that was largely the result of supply disruptions caused by Japan’s March 11th earthquake and tsunami. The inability to get critical component parts in such industries as autos and electronics slowed U.S. manufacturing.

Orders for autos and auto parts rose 0.6% in May after having fallen 5.3% in April. The rebound in May in both autos and broader categories supports the view that the April lull was temporary.

Separately, the Commerce Department said the economy grew at a 1.9% annual rate in the January-March quarter. That’s not much better than the 1.8% rate estimated a month ago. The small upward revision reflected stronger exports and more business spending on stockpiles.

The bulk of the strength in the durables report came across a wide range of industries. Businesses boosted their orders for machinery 1.2% and demand for computers rose 1.3%. Communications equipment jumped 3.6% increase.

Businesses boosted demand for transportation products 5.8%. Much of that increase reflected a 36.5% surge in orders for commercial aircraft, a very volatile industry that had reported a big decline in production in April. Excluding the volatile transportation category, orders would have risen 0.6% in May after dropping 0.4% in April.

The capital goods category excluding aircraft is viewed as a proxy for business investment. It rose 1.6% after a 0.8% drop in April. Economists believe this category will show strength as companies respond to a one-year tax break aimed at spurring capital spending.

Manufacturing has been one of the strongest sectors of the economy since the recession official ended two years ago. However, there are concerns that the production pace could slow in coming months as businesses decide to scale back their restocking of inventories.

A closely watched gauge of manufacturing activity from the Institute of Supply Manage showed manufacturing dipped to 53.5 in May from 60.4 in April. Readings above 50 indicate manufacturing is continuing to expand. Regional manufacturing surveys put out by the Federal Reserve Banks of New York and Philadelphia also showed recent weakness.

But as production returns to more normal levels in Japan, economists are forecasting that disruptions to factory production in the United States will ease in coming months.

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