By Nick Timiraos
WASHINGTON--Orders for big-ticket manufactured goods rebounded
in June, a sign that capital investment by businesses could boost
U.S. economic growth heading into the second half of the year.
But shipments of core capital goods, a key gauge of equipment
spending, fell in June, prompting some economists to trim their
forecasts of economic growth for the second quarter.
Demand for durable goods--products like airplanes, cars, heavy
machinery and appliances that are designed to last at least three
years-- rose a seasonally adjusted 0.7% from May, the Commerce
Department said Friday.
Economists surveyed by The Wall Street Journal had forecast
orders would rise 0.5%. Orders fell 1% in May and have increased in
four of the past five months.
Excluding transportation, an often volatile category influenced
by orders of civilian aircraft, durable-goods orders rose 0.8% in
June. Excluding defense, orders increased 0.7%.
A closely watched measure of business investment--orders for
nondefense capital goods, excluding aircraft--rose 1.4% in June
after a 1.2% decline in May that was previously reported as a 0.7%
gain. Shipments of those goods fell 1% in June following declines
in May and April.
An uptick in capital goods shipments "was supposed to be part of
the anticipated second-quarter bounce" in economic growth, said
Chris Low, chief economist at FTN Financial, in a note to
clients.
Friday's report looked "pretty good on the surface, and then the
deeper you dig, the worse it gets," wrote Stephen Stanley of
Pierpont Securities.
Economists have been looking for business investment to pick up
in the second quarter after the economy contracted at a 2.9% annual
pace in the first quarter. The Commerce Department is set to
release its initial estimate of second-quarter economic growth next
week.
Friday's report prompted economists at Barclays Capital to drop
their forecast for gross domestic product, the broadest measure of
goods and services produced across the economy, to a 2.8%
annualized gain in the second quarter, from a prior estimate of 3%.
Economists at BNP Paribas said growth could be as low as 2.5%,
instead of their current forecast of 2.7%.
Weak output has puzzled economists given continued gains in
labor markets. Nonfarm employers added 288,000 jobs in June, the
fifth straight month in which the economy added at least 200,000
positions, according to the Labor Department.
A separate report from the Federal Reserve last week showed that
U.S. industrial output increased modestly in June but at a slower
pace than May, suggesting steady but unremarkable growth in
consumer and business spending during the second quarter.
Other sectors have offered mixed evidence that job gains are
making consumers confident enough to ramp up spending. Reports this
week showed that existing-home sales ticked up for the third
straight month in June, but sales of new homes dropped 8.1%.
Through June, sales of new homes are running 4.9% below last year's
level, while sales of existing homes are off 5.3%.
Friday's report showed factory shipments of durable goods rose
0.1% in June, following a 0.1% decline in May. Unfilled orders rose
0.8% in June following a 0.7% gain in May. Durable-goods
inventories increased 0.4% following a 1% rise in May.
Write to Nick Timiraos at nick.timiraos@wsj.com