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Published: Friday, 5/25/2012

Factory orders slightly up; investment falls

ASSOCIATED PRESS

WASHINGTON -- Orders for long-lasting factory goods edged up slightly in April. But a measure that tracks business investment spending fell for a second straight month.

Durable goods orders increased 0.2 percent last month after a 3.7 percent decline in March, the Commerce Department said Thursday. Gains in volatile commercial aircraft orders and more demand for autos and parts drove the modest increase.

So-called core capital goods orders, considered a proxy for business investment plans, fell 1.9 percent in April after a 2.2 percent decline in March. Demand for computers and electronics products and heavy machinery fell.

Durable goods are items expected to last at least three years. Orders rose in April to $215.5 billion, up 52.5 percent from their recession low hit in the spring of 2009. Orders are still 11.6 percent below their peak in December, 2007.

The decline in core capital goods could suggest that second-quarter growth is off to a slow start. Orders, however, tend to fluctuate sharply from month to month.

Many economists approached Thursday's report cautiously, noting the findings conflicted with two reports suggesting factory activity and output grew in April.

The Institute for Supply Management said factory activity grew in April at the fastest pace in 10 months. The group's closely watched manufacturing index showed strength in new orders, production, and hiring. The Federal Reserve reported U.S. factory output rose 0.6 percent in April. Half of the increase reflected a big jump in motor vehicle and parts production.

Orders for autos and auto parts rose 5.6 percent, reflecting the continued strong demand automakers are seeing.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said weakness could be the result of lingering effects of the expiration of favorable business investment tax breaks at the end of 2011.



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