US durable goods fall 1% in June, aggravating recovery worries

28 July 2010 14:46 [Source: ICIS news]

WASHINGTON (ICIS)--New orders for US durable goods fell by $2bn (€1.5bn) or 1% in June from May to $190.5bn, the Commerce Department said on Wednesday, marking the second consecutive monthly decrease and raising further concerns about the recovery.

In its monthly report, the department noted that the decline was fairly widespread across US manufacturing sectors, although gains were seen in selected sectors such as computers, communications equipment and electrical goods. Fabricated metal products also showed a small advance.

Even with civilian aircraft and other transportation equipment subtracted from the total, overall durable goods orders fell in June by 0.6%.

Economists typically look at durable goods data other than civilian aircraft because orders for commercial airliners are often made in multiple-plane purchases and in any given month can see broad swings.

Durable goods are manufactured products which are meant to last three years or more and include such items as automobiles, appliances, transportation and manufacturing equipment.

Many durable goods, such as computers and automobiles, are major downstream markets for chemicals and chemicals-based products used in manufacturing processes or as end-product components.

The department said that unfilled orders for manufactured durable goods decreased in June by $100m ($0.1bn) to $802.9bn. Although that decline was statistically insignificant compared with May’s $803bn in unfilled orders, it was a downturn and it stands in contrast to the 0.3% increase reported in May from April.

Inventories of produced but unsold durable goods rose in June by 0.9% or $2.8bn to $308.2bn compared with May and marked the sixth consecutive monthly increase.

The decline in unfilled orders for durable goods and a build-up in unsold inventories indicate that demand is falling below production rates and could lead some manufacturers to ease output and further delay new hiring.

The negative durable goods report comes amid other worrisome signs that the US economic recovery is slowing and might stall.

US leading economic indicators have edged lower, retail sales are down, the housing sector remains near record lows, and Fed Chairman Ben Bernanke and the top White House economist have indicated that the recovery is wobbly.

US durable goods orders and inventories*

      June               (bn $)

  June vs. May             (%)

    May vs. Apr (r)     (%)

New orders

     190.5

         -1.0

        -0.8

Unfilled orders

     802.9

            0

         0.3

Total inventories

     308.2

          0.9

         1.1

r: revised *seasonally adjusted

($1 = €0.77)

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