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By Mike Caggeso
Orders for durable goods, excluding transportation, rose 2.5% in April, an unexpected gain that underscores that a weak greenback and strong overseas demand for American-made goods are helping recharge the downtrodden U.S. economy.
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Total orders last month shrunk by 0.5% to a seasonally adjusted $214.42 billion, the Commerce Department reported. That was well below some forecasts of a 2.0% drop.
Durable goods – such as cars, appliances, electronics and toys – are manufactured items that are expected to last at least a few years. Together with sales of nondurable goods – more-ephemeral items such as paper and food – and sales in the service sector, durable goods are an important economic indicator.
"Here we really see that the effects of a weaker dollar are in fact giving us a lot more juice in this economy than we had expected," Anthony Chan, chief economist at JPMorgan Chase & Co.'s (JPM) Private Client Services Group, said in an interview with Bloomberg Radio. "When the economy weakens you tend to see the manufacturing sector also weaken, [though] this time around we're not seeing that."
Among the sectors that posted gains, electrical equipment orders surged 27.8%. Orders for defense-related goods rose 4.8%
Among the sectors in which orders declined, aircraft orders plunged 24% and orders for transportation equipment fell 8%.
All told, the numbers caused trading to open higher yesterday (Wednesday), as the report doesn't point to further declines in activity, said Joel L. Naroff, president and chief economist of Naroff Economic Advisors, Inc.
Naroff said the U.S. economy is still on the soft side, but as long as foreign demand for our products holds, we'll dodge a sharp decline.
"Yes, housing is in the dumps and consumers are suffering from a massive case of food, energy and home-price depression," Naroff said. "But there is a real chance we escape with maybe only one negative quarter of growth. And if the current quarter manages to eke out a gain, then there just may not be any negative quarter."
Past statistics, however, indicate a bleaker outlook.
In March, orders for durable goods decreased 0.3%, the third straight month of declines. The last time durable goods orders declined for three consecutive months, the United States was headed into the 2001 recession.
And with another net decline in April, it'd take a historic rebound to reverse this historical trend.
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