Orders for Durable Goods Climb 0.4% After 3-Month Fall

U.S. factory orders for “big ticket” durable goods, which had declined for three consecutive months, rose a slight 0.4% in May, but the increase came exclusively from a surge in demand for military equipment, the government said Tuesday.

The Commerce Department said durable goods orders rose $379 million over the April level to total $104.1 billion last month.

It was the first increase since a 0.6% rise in January. Orders for durable goods, items expected to last three or more years, had fallen 0.6% in February, 2.7% in March and 0.9% in April.

But the May advance failed to impress analysts who noted that orders would have plunged 2% without a big rise in demand for military hardware.

“The fact that non-defense is down is a discouraging signal for manufacturers. Overall orders have been stagnant for the last two years, and they just can’t seem to get untracked,” said David Wyss, an economist with Data Resources, a private forecasting firm.

Commerce Secretary Malcolm Baldrige said he believed that uncertainty over the final outcome of the congressional debate on tax reform was having a detrimental impact on factory orders, but he predicted an upturn in the months ahead.

“I am optimistic that activity in the durable goods industries will pick up in the second half as it already has in housing and consumer spending,” Baldrige said in a statement.

The May report said orders in the volatile defense category climbed 36.2% to $8.9 billion. The increase was led by a big jump in orders for aircraft and shipbuilding. The gain followed a 37.8% fall in April’s defense orders.

Orders in the closely watched category of non-defense capital goods were unchanged in May at $26.1 billion following a 1.4% April decline.

This category, which signals industry plans to expand and modernize production facilities, has been weak all year as American businesses have drastically scaled back their investment plans.

Orders in transportation industries rose 6.5% in May, reflecting the increase in defense orders.

Orders for primary metals such as steel fell 8% in a continued decline that began more than a year ago.