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U.S. Durable Goods Orders Rebound 3.4% In June

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After reporting a sharp drop in new orders for U.S. manufactured durable goods in the previous month, the Commerce Department released a report on Monday showing that orders rebounded strongly in the month of June.

The report said durable goods orders jumped by 3.4 percent in June following a revised 2.1 percent decrease in May.

Economists had expected orders to increase by 3.1 percent compared to the 2.2 percent drop that had been reported for the previous month.

The bigger than expected increase in durable goods orders primarily reflected a rebound in orders for transportation equipment, which surged up by 8.9 percent in June after tumbling by 6.1 percent in May.

Orders for non-defense aircraft and parts showed a particularly strong increase, soaring by 66.1 percent in June after plunging by 31.6 percent in the previous month.

Steve Murphy, U.S. Economist at Capital Economics, said, "This big jump in aircraft orders was not a big surprise, as we already knew Boeing received orders for an unusually high 161 planes last month (up from only 11 in May) due to the biennial Paris air show."

"Given that GDP measures output rather than orders, the surge in aircraft orders will not show up in the national accounts data until much later since the lead times between orders and production for aircraft are long," he added. "And as a result, this tells us nothing about the current strength of the economy."

Excluding the increase in orders for transportation equipment, durable goods orders still rose by 0.8 percent in June compared to a 0.1 percent dip in May. Ex-transportation orders had been expected to climb by 0.5 percent.

The report said increases in orders for electrical equipment, appliances, and components, fabricated metal products and machinery were partly offset by a decrease in orders for primary metals.

The Commerce Department also said orders for non-defense capital goods excluding aircraft, a closely watched indicator of capital spending, rose by 0.9 percent in June after falling by 0.4 percent in May.

Meanwhile, shipments in the same category edged down by 0.1 percent in June after dipping by 0.3 percent in the previous month.

Next Tuesday, the Commerce Department is scheduled to release a separate report on factory orders in the month of June. The report includes data on orders for both durable and non-durable goods.

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