Ahead of the Bell: US durable goods

Business orders for US durable goods expected to show gain in July, helped by airplane demand

Associated Press
US durable goods orders surge record 22.6 percent
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In this photo taken Aug. 21, 2014, Orestes Perez, right, and his niece Yanuska Perez, check a 2013 Ford Fusion SE at a local dealership in Hialeah, Fla. The Commerce Department reports on business orders for durable goods in July on Tuesday, Aug. 26, 2014. (AP Photo/Alan Diaz)

WASHINGTON (AP) -- The government reports on business orders for durable goods in July. The report will be released at 8:30 a.m. Eastern time Tuesday.

AIRPLANE BOOST: The expectation is that orders for long-lasting manufactured goods increased 5.5 percent in July, according to a survey of economists by data firm FactSet.

MANUFACTURING GAINS: In June, orders rebounded by 1.7 percent following a decline in May of 0.9 percent. The June rebound was boosted by demand in a key category that signals business investment, which increased 3.3 percent in June after falling in the two previous months.

The strength came from a rise in demand for commercial airplanes and machinery.

Analysts believe that stronger factory output will support economic growth in the second half of this year.

After going into reverse during the first three months of the year, in large part because of the severe winter, the economy rebounded in the April-June quarter, growing at a solid annual rate of 4 percent as measured by the gross domestic product, the economy's total output of goods and services.

The government will revise its first estimate of GDP on Thursday and many economists believe that figure will be revised down slightly but remain at a still-strong 3.9 percent growth rate. Economists believe strength in employment, manufacturing and consumer spending will support healthy growth of around 3 percent in the second half of this year.

Factory output rose for the sixth consecutive month in July, increasing by 1 percent, led by a jump in production of motor vehicles, furniture, textiles and metals.

In another sign of strength in manufacturing, the Institute for Supply Management reported that its manufacturing index climbed to a reading of 57.1 in July, the highest level since April 2011 and up from a June reading of 55.3. Any reading above 50 signals that manufacturing activity is growing.

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