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US durable goods orders rose 0.8 per cent in April, but business investment demand declined

WASHINGTON - Orders to U.S. factories for long-lasting manufactured goods advanced for a third month in April, but much of the strength came from a big surge in demand for military aircraft. Orders in a category that signals business investment plans fell by the largest amount in three months.

Orders for durable manufactured goods rose 0.8 per cent from the previous month after a 3.6 per cent gain in March and a 2.6 per cent rise in February, the Commerce Department said Tuesday. The April strength came from a big jump in demand for defence goods including airplanes. Excluding defence, orders would have fallen 0.8 per cent in April.

The April orders performance supports the view that the economy should benefit in the coming months from increased production at factories, which will bolster growth and spur further hiring.

Orders for core capital goods, a category viewed as a good proxy for business investment plans, fell 1.2 per cent in April. It was the weakest showing since a 1.9 per cent January drop.

The harsh winter helped slow overall economic growth to a barely discernible 0.1 per cent in the January-March quarter. That figure will be updated on Thursday, and many economists believe it could slip into negative territory.

But economists are looking for a significant rebound in the April-June quarter, reflecting in part pent-up demand from consumers who put off purchases because of the bad weather. Many analysts say that growth in the spring quarter could come in as high as an annual rate of between 3.5 per cent and 4 per cent.

In April, orders for transportation goods increased 2.3 per cent. That reflected a 13.1 per cent surge in demand for military aircraft, which offset a 4.1 per cent drop in demand for commercial aircraft. Orders for motor vehicles fell 1 per cent in April after a small 0.3 per cent gain in March.

A number of categories posted declines in April. Demand for primary metals such as steel fell 0.4 per cent, and orders for machinery dropped 2.9 per cent. Orders for computers were up 7 per cent, but demand for communications equipment fell 5.5 per cent.

The 1.2 drop in demand for core capital goods, a category that covers non-defence equipment excluding aircraft, followed a 4.7 per cent surge in March. Analysts believe business investment will rebound in coming months as companies respond to rising demand.

The Institute for Supply Management reported last week that manufacturing grew faster in April than March as exports picked up and factories accelerated their hiring.

The ISM manufacturing index rose to 54.9 in April from 53.7 in March. Any reading above 50 indicates expansion.

Manufacturers are benefiting from increased spending by consumers and businesses. Americans are buying more at retail stores and purchasing more cars after the harsh winter. Factories are also shipping more goods overseas.

However, there is concern that slower growth in China, the world's second largest economy, could dampen demand for exports in coming months. China's manufacturing sector barely grew in April, according to Chinese government statistics. A private survey found that Chinese factories actually saw production fall in April for a fourth straight month.

The Canadian Press


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