Ahead of the Bell: US Durable Goods

WASHINGTON (AP) ? Businesses have been more cautious this year about spending on long-lasting U.S. manufactured goods, a key reason the economy has stayed weak. A report Thursday could offer some clues if their outlook is changing.

Economists forecast that orders for durable goods rose 0.5 percent in June, according to a survey by FactSet. The Commerce Department will release the report at 8:30 a.m. Eastern time Thursday.

Orders rose 1.3 percent in May to $217.4 billion, after two months of declines. That's 52.5 percent higher than the recession low hit in the spring of 2009. Orders are still 12.1 percent below their peak in December 2007.

Most economists will pay closer attention to orders for so-called core capital goods ? computers, machinery and other goods that signal business investment plans. In May, those orders rose at a solid 2.1 percent pace after two months of declines, a hopeful sign that companies are boosting investment.

Durable goods are items that are expected to last at least three years. Orders can be volatile from month to month.

Manufacturing, which has helped drive growth since the recession ended three years ago, has slowed in recent months, along with the broader economy.

Factory activity shrank in June for the first time in nearly three years, according to a survey by the Institute for Supply Management, a trade group. And the Federal Reserve Bank of Philadelphia said last week that manufacturing in that region contracted in July for the third straight month.

There have been a few positive signs.

A survey from Federal Reserve Bank of New York found that manufacturing expanded in that region this month.

And some large industrial companies reported healthy earnings Wednesday. Heavy equipment maker Caterpillar said its second-quarter profit jumped 67 percent, largely because of strong demand for construction and mining equipment. It expressed confidence that the global economy would improve next year.

Healthy sales of passenger jets pushed up Boeing Co.'s second quarter profits 3 percent, the company said Wednesday, a better showing than many analysts expected. But Ford Motor Co. said its net income fell 57 percent, largely because it lost $404 million in Europe.

Factories kept hiring this spring but at a slower pace. Manufacturers added an average of 10,000 jobs a month in the April-June quarter. That's down from 41,000 a month in the January-March quarter.

Overall hiring has also weakened. Employers have added an average of just 73,000 jobs a month in April and May. That followed average gains of 226,000 a month in the first three months of the year.

With job growth weaker and the unemployment rate still high, consumers have pulled back on spending and businesses appear less confident about the economy. That is likely slowing economic growth.

On Friday, the government will issue its first estimate for economic growth in the April-June period. Economists forecast that will show the economy expanded at only a 1.5 percent annual pace. That's down from 1.9 percent in the first quarter.

Source: http://news.yahoo.com/ahead-bell-us-durable-goods-103157205.html

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