Durable goods orders jumped in May

Fastest pace in 14 months seen; aircraft orders strong

updated 8:44 a.m. ET June 24, 2005

WASHINGTON - Orders to U.S. factories for big-ticket manufactured goods shot up at the fastest pace in 14 months in May, reflecting a huge jump in demand for commercial aircraft.

The Commerce Department reported Friday that orders for durable goods rose by 5.5 percent last month to total $210.7 billion. The gain far exceeded the 1.9 percent increase that economists had been expecting, but the strength was concentrated in demand for commercial aircraft, where orders more than doubled from their April level.

Excluding the volatile transportation sector, new orders for durable goods fell by 0.2 percent last month, marking the third decline in the past four months for orders outside of transportation.

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Economists have grown worried about whether manufacturing, the hardest hit sector in the 2001 recession, could be showing signs of faltering again as businesses grow more cautious in the face of a renewed surge in oil prices.

Demand for non-defense capital goods excluding aircraft fell by 2.3 percent in May, the biggest drop since last October. This category is closely watched for signs it can give of business plans to invest in new equipment to expand and modernize.

The 5.5 percent overall rise in orders followed a gain of 1.4 percent in April, which had been the first increase after three straight monthly declines. It was the biggest advance since a 5.9 percent orders jump in March 2004.

Last month’s surge was concentrated in demand for commercial aircraft, which jumped by 164.8 percent last month to $18.7 billion.

Overall transportation orders rose by 21.2 percent as demand for motor vehicles and parts edged up by a tiny 0.2 percent, reflecting a slowdown in auto production this year.

In other sectors, demand for primary metals including steel was unchanged in May while demand for computers and electronic products fell by 1.2 percent and orders for industrial machinery dropped 1.9 percent.