It is interesting to me how Bloomberg portrays this "worse-than-expected" report as "good news":
July 29 (Bloomberg) -- Orders for U.S. durable goods fell more than forecast in June, depressed by declines in demand for volatile categories including automobiles, aircraft and defense equipment that overshadowed gains elsewhere.
The 2.5 percent drop in bookings for goods meant to last several years was the first decrease in three months and followed a 1.3 percent increase the prior month, the Commerce Department said today in Washington. Excluding transportation equipment, orders unexpectedly climbed 1.1 percent, the most in four months.
The figures used to calculate economic growth showed companies were planning to boost investment in coming months, adding to evidence the worst recession in five decades was starting to ease. Caterpillar Inc. is among companies seeing steadier demand as government stimulus plans here and abroad start to kick in, signaling an economic recovery is in sight.
``Manufacturing is still weak, but the weakness is abating,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``We should see orders turning up in coming months, specially now with auto production ramping higher. That would set the stage for an upturn in business investment and an economic recovery.''
Economists expected a 0.6 percent drop in orders, according to the median of 73 forecasts in a Bloomberg News survey, after a previously reported 1.8 percent gain in May. Estimates ranged from a decline of 2 percent to a gain of 2 percent.
Excluding transportation equipment, orders were forecast to be unchanged, according to the Bloomberg survey. Commerce revised the May figures in this category to show a 0.8 percent gain, down from the 1.1 percent increase previously reported.
Volatility in Transportation
Orders for transportation equipment were down 13 percent, with commercial aircraft dropping 39 percent. Plane bookings had jumped 60 percent in May.
Automobile demand dropped 1 percent after an 8.7 percent decrease in May, today's report showed. Factories at General Motors Co. and Chrysler Group LLC were closed for at least part of the month, worsening the slump in bookings for autos and parts.
Orders excluding defense equipment decreased 0.7 percent as bookings for military gear slumped 28 percent.
Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, climbed 1.4 percent after a 4.3 percent increase the prior month. Shipments of those items, used in calculating gross domestic product, rose 0.1 percent, the first gain since December.
Drop in Stockpiles
Ongoing inventory drawdown in manufacturing is setting the stage for future growth. Stockpiles fell at an $87 billion annual rate in the first quarter, the biggest drop on record, according to figures from Commerce. Companies cut inventories by 0.9 percent in June, today's report showed.
The economy will grow at an average 1.5 percent rate in the last six months of the year, according to economists surveyed by Bloomberg in the first week of July. That follows a projected 1.5 percent decline in the second quarter and a 5.5 percent rate of contraction in the first three months of 2009.
``The pace of decline appears to have slowed significantly, and final demand and production have shown tentative signs of stabilization,'' Federal Reserve Chairman Ben S. Bernanke told Congress last week.
Caterpillar, the biggest maker of earthmoving equipment, posted second-quarter profit that exceeded analysts' highest estimate and raised its full-year forecast, saying stimulus programs are starting to support global demand.
``We are seeing signs of stabilization that we hope will set the foundation for an eventual recovery,'' Chief Executive Officer Jim Owens said in a statement July 21. ``Fiscal policy and monetary stimulus have been introduced around the world, and we are seeing signs, particularly in China, that they are beginning to work.''
