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U.S. durables orders jump
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June 28, 2000: 10:36 a.m. ET
May orders jump 6%, reversing April's decline; electronics orders soar
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NEW YORK (CNNfn) - Orders for U.S. durable goods jumped in May, bouncing back sharply from the month before as demand for electronics, military gear and transportation equipment surged, the government reported Wednesday. Excluding transportation goods, orders jumped even higher.
Orders for durable goods, or items built to last at least three years, jumped 6 percent, the Commerce Department said; more than double the 2.8 percent gain predicted by analysts and reversing April's revised 5.7 percent drop. Excluding transportation goods, which tend to be volatile from month to month, orders rose 6.6 percent after a revised 5.6 percent drop a month earlier. Excluding defense goods, orders rose 5.8 percent.
 Some economists interpreted May's increase as a sign that demand for U.S.-made goods at home and abroad remains robust, despite six interest rate increases by the Federal Reserve in the past year aimed at curtailing spending. The Fed's policy-making arm, the Federal Open Market Committee, will disclose whether a seventh rate hike is in store at the conclusion of their two-day meeting later Wednesday.
The Fed "will pay some attention to it, but it won't sway their decision," said Wayne Ayers, chief economist with FleetBoston, adding that he expects to see more numbers in the months ahead that likely will counter recent evidence of an economic slowdown. "While I think the slowdown is real, I think the market has gotten a little bit ahead of itself," he said.
Overall, U.S. factories have been keeping production strong in response to surging consumer demand, a large factor behind the resilient economy now into its 10th and record year of uninterrupted expansion that the Fed is trying to tame. Consumer spending accounts for roughly two-thirds of the economy's output; personal spending rose at a 0.4 percent pace in April.
Electronics orders boomerang
On top of that, rebounding economic growth abroad, particularly in the Far East, has spurred demand for U.S. products, especially goods that can be used in the production of such items as computers, electronics and other consumer-oriented merchandise.
Orders for electronic goods surged 26 percent last month, the biggest jump since August 1997, after declining almost 18 percent the month before.
 However, with recent economic reports indicating that the economy may be starting to respond to the Fed's recent spate of rate increases, and with expectations that the economy will definitely slow in the second half of the year, Ayers told CNNfn's Before Hours that financial markets will likely take the report in stride. (485KB WAV) (485KB AIFF)
Which they did. Both the Dow Jones industrial average and Nasdaq composite index posted moderate gains in early trading ahead of the Fed's decision, with investors largely ignoring the durable goods numbers. Bond investors registered a similarly muted reaction to the report.
"The bottom line here is that the month-to-month volatility in the durable orders data is such that the true information content in a single report is very small -- there's just too much noise," said Ian Shepherdson, chief U.S. economist with High Frequency Economics.
Orders for transportation equipment, including automobiles, rose 3.5 percent last month while orders for civilian aircraft rose 1.9 percent. Non-defense capital goods orders, excluding aircraft - an indication of the amount that businesses are investing in new equipment -- fell 2.1 percent in May after a 2.6 percent increase a month earlier. 
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