Aircraft help US durable goods orders to rise by 1.1% in May

27 June 2012 14:50  [Source: ICIS news]

WASHINGTON (ICIS)--New orders for US durable goods rose by 1.1% in May from April, the Commerce Department said on Wednesday, a gain that followed two consecutive months of decline and one based largely on military and civilian aircraft sales.

With aircraft and other transportation orders removed from the overall total, the department said that new orders for durable goods rose by 0.4% in May.

In its monthly report, the department said durable goods orders last month were up by $2.3bn (€1.8bn) compared with April to nearly $217.2bn following a revised 0.2% decrease in the previous month.

Durable goods are manufactured products 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 derivatives used in manufacturing processes or as end-product components.

The biggest gains for durable goods orders in May included a 4.9% increase for civilian airliners and parts and a sharp 6.9% rise in military aircraft orders.

Economists typically look at durable goods data minus aircraft sales because airliner and defence-related orders often are made in multiple-plane purchases and in any given month those commitments – or lack of them – can affect manufacturing data disproportionately.

The department said that unfilled orders for durable goods fell in May by a statistically insignificant $400m to $984.5bn, but that marginal reduction marked the third straight month of decline for the manufacturing orders backlog.

But here again, the data for unfilled orders was largely influenced by declines in back orders for military aircraft, civilian airliners and related parts.  Military aviation saw a 1.1% drop in unfilled orders and civilian aircraft declined by a narrow 0.1% for May.

Gains in unfilled orders are seen as a positive sign for the economy because it suggests that demand is growing at a pace faster than manufacturers can produce.  As a corollary, when the backlog of unfilled orders falls, it suggests that producers are catching up with easing demand.

Inventories of unsold manufactured durable goods rose by 0.5% in May from April, the department said, rising by $1.8bn to $365.8bn for the 28th advance in the last 29 months. 

As in other categories, the build in inventories was strongest in civilian aircraft, up by 1.7% last month, and a 1.6% gain in backorders for military aviation equipment.

US durable goods orders and inventories*

 

May          (bn $)

May vs Apr  (%)

Apr vs Mar (r) (%)

New orders

217.2

1.1

-0.2

Unfilled orders

984.5

0.0

-0.1

Total inventories

365.8

0.5

0.3

r: revised  *seasonally adjusted

($1 = €0.80)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
+1 713 525 2653



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