Demand for goods manufactured inU.S. falls in May for Second Straight Month

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Demand for long-lasting manufactured goods produced in the U.S fell for a second straight month in May.

Orders for durable goods–products designed to last at least three years, such as washing machines and fighter jets–declined 0.6% from the prior month to a seasonally adjusted $248.755 billion in May, the Commerce Department said Wednesday.

Economists surveyed by The Wall Street Journal had expected a 1% decrease for the month. Orders also fell in April, though the drop was revised to a narrower 1% decline from a previous estimate of down 1.6%.

More broadly, orders through the first five months of the year were up 9.9% from the same period in 2017, well outpacing the recent pace of consumer-price inflation. Durable-goods shipments fell 0.1% in May but were up 7% through the first five months of the year compared with the start of 2017.

A closely watched proxy for business investment, new orders for nondefense capital goods excluding aircraft, decreased 0.2% in May after a solid gain in April. That gauge has failed to increase for two straight months since August and September last year.

Business investment measures are being watched for signs that companies are responding to tax-law changes. The new tax rules passed by Congress late last year were designed to incentivize businesses to increase capital investment. But so far demand for capital goods has decelerated somewhat from last year.

The year-over-year growth rate in the subset of capital-goods spending peaked in September and modestly cooled since. Strong demand for durable goods last year was at least partially due to rising oil prices spurring more investment by energy firms.

That’s consistent with a separate measure of business investment on equipment, which showed such spending rose in the first three months of the year at the slowest pace in five quarters.

White House economists have said some businesses may have accelerated purchases of equipment into late 2017. The new law allowed firms to take bonus depreciation on purchases back to Sept. 27, 2017, and tax break was more valuable last year when corporate rates were higher.

Spending on other forms of business investment, including building structures and research and development, did increase at a faster pace in the first quarter.

Other measures of U.S. manufacturing are sending mixed signals. The Federal Reserve’s measure of manufacturing output declined in May, in part due to a factory fire that idled production of Ford pickup trucks. But the Institute for Supply Management said U.S. factory activity picked up in May after a two-month slowdown. The trade group said demand remained high, but did report worries over the effect of tariffs.

Shifting trade policies are becoming a worry for some manufacturers. Motorcycle maker Harley-Davidson Inc. said this week it plans to shift more production overseas to avoid European Union tariffs.

“The significant tailwind from corporate tax cuts is now being offset by other forces, most likely the uncertainties associated with the ongoing trade war,” Deutsche Bank Securities economist Torsten Slok said earlier this week.

Wednesday’s report showed orders in the often volatile civilian-aircraft segment fell 7% in May. Orders for motor vehicles and parts declined 4.2% from the prior month. Excluding cars, planes and other transportation products, orders were down 0.3%.

Orders for defense capital goods, another choppy category, increased 15.1%. Excluding military demand, durable orders were down 1.5%.

Demand for U.S.-made primary metals, including steel and aluminum, decreased 0.4% on the month but was up 15.8% through the first five months of the year, compared with the same period last year.
Source: Dow Jones

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Godwin Okafor is a financial journalist, Internet Social Entrepreneur and the Founder Naija247news Media Ltd He has over 16 experiences in journalism, which cuts across traditional and digital media. He started his journalism career in Business Day, Where he was a senior editorial graphic artist, before he left to start Naija247news, An Online Financial Newspaper in 2010. He has won series of awards and he is the chairman of Emmerich Resources Limited, the publisher of Naija247news.com and also sits on the board of Students In Business Awards, (SIBA).

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