Durable goods orders surge again in May

WASHINGTON -- Orders to factories for big-ticket manufactured goods rose sharply for a second straight month in May, and a key indicator of business investment surged by the largest amount in nearly five years.

The Commerce Department said Wednesday that demand for durable goods rose 1.8% last month, far better than the 0.6% decline that economists expected. It matched the rise in April, with both months posting the best performance since December 2007, when the recession began.

Orders for non-defense capital goods, a key proxy for business investment plans, jumped 4.8%, the biggest increase since September 2004. That could signal that businesses have stopped trimming their investment spending.

The back-to-back monthly gains in orders for durable goods, or items expected to last at least three years, were further evidence that a dismal stretch for U.S. manufacturers may be nearing an end. Still, analysts say any sustained rebound is still months away.

American companies have been forced to trim millions of workers as they struggle with the longest U.S. recession since World War II. U.S. businesses also have faced a sharp drop in exports as many major overseas markets struggle with their own downturns.

Excluding transportation, orders for durable goods posted a 1.1% rise in May, also better than the 0.4% drop that had been expected.

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Demand for transportation products rose 3.6%, reflecting a 68.1% surge in orders for commercial aircraft, a volatile category that had fallen 1.4% the previous month.

The big increase in aircraft offset continued weakness in the troubled auto sector. Demand for motor vehicles and parts fell 8.1% in May, reflecting major disruptions from the bankruptcy filings at Chrysler and General Motors.

Orders for machinery rose 7.7%, while demand for computers and related products surged 9.4% last month.

The overall economy, as measured by the gross domestic product, shrank at annual rates of 6.3% in the final three months of last year and 5.7% in the January-March quarter. That was the worst six-month stretch for the GDP in more than 50 years. The government is scheduled to revise the first-quarter GDP figure Thursday, but analysts expect that revision will leave the overall figure unchanged.