There were a few important reports on the economy worth mentioning this morning. First, orders for U.S.-manufactured durable goods (items meant to last at least three years) fell in April by $4.2 billion (1.7 percent) to $248.5 billion, according to new data from the Census Bureau. That was the first monthly decline since January and worse than expected. However, the March gain was revised higher and most of the weakness in April was due to a 6.1 percent drop in transportation equipment. Moreover, “core” durable goods orders, which exclude the volatile transportation component, rose by 0.9 percent in April, and orders for nondefense capital goods excluding aircraft, i.e. core capital expenditures, an important proxy for U.S. business investment, lifted by 1.0 percent. Both of those gains were larger than anticipated and bode well for second-quarter U.S. gross domestic product (GDP) growth.
Elsewhere, manufacturing activity in the Mid-Atlantic region of the country jumped this month by the most in two years, according to a new report from the Federal Reserve Bank of Richmond. Significant improvements were seen in shipments, new orders, and capacity utilization, and total employment and worker compensation also increased slightly. Similarly, manufacturing activity in the Midwest region of the country expanded in May at the fastest pace on record, according to the Federal Reserve Bank of Kansas City. Current measures of factory output, production, shipments, and new orders all improved in May, while forward-looking (six months ahead) gauges cooled. A few comments from surveyed managers can be seen below:
- “Steel tariffs continue to be a strong headwind. When Trump decided not to make a final decision until June 1 all that did was raise pricing by the domestic suppliers again and keep the foreign suppliers out as they did not know what their tariff rates would be if at all. Some stability in the marketplace would be nice.”
- “Work force availability is a big issue right now. Hiring skilled and relatively unskilled labor is very difficult.”
- “They say there are workers out there but we can’t find them. We are looking at raising our starting pay again. That will be our 3rd increase in 18 months. We get people here to work but they walk off the job because they don’t like the work. Hard to manage staffing when that happens.”
Sources: Econoday, U.S. Census Bureau, FRBR, FRBKC, FRBSLPost author: Charles Couch