Orders for US durable goods drop 1 percent in May

Published on NewsOK Modified: June 25, 2014 at 9:55 am •  Published: June 25, 2014
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WASHINGTON (AP) — Orders for U.S. durable goods tumbled 1 percent in May as demand for military equipment fell sharply. But excluding defense-related goods, orders actually rose, and orders in a key category that signals business investment also increased.

The gains outside of military goods suggest business spending is picking up, which could give the economy a much-needed boost.

The Commerce Department said Wednesday that orders, excluding defense, rose 0.6 percent in May, after falling 0.8 percent in April. Orders for core capital goods, which reflect business investment, increased 0.7 percent, after a 1.1 percent drop.

Demand for military goods is highly volatile and had surged in April, so the sharp drop in May wasn't a surprise and was dismissed by many economists.

"Monthly defense orders are so regularly irregular that they do not matter, given their tendency to promptly reverse," said Michael Montgomery, an economist at IHS Global Insight.

Factories reported higher demand for steel and other metals, computers, and autos. Durable goods are items expected to last at least three years.

The figures come as a separate report showed that the U.S. economy contracted sharply in the first three months of the year, largely because of bad weather. The economy shrank 2.9 percent at an annual rate in the first quarter, the worst showing since the first quarter of 2009, in the depths of the Great Recession.

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