International_U.S._Eagle

Orders to U.S. factories for big-ticket manufactured goods posted a sizable gain in June, and business investment rebounded after two months of declines.

Orders for durable goods jumped 3.4% between June and May (during the latter, orders fell 2.1%), says the U.S. Commerce Department. The gain last month was the best result seen since March, and it largely reflects a surge in demand for commercial aircraft.

In fact, demand for aircraft shot up 66.1% in June, compared to a 31.6% plunge in May. Overall demand for transportation goods increased 8.9%.

Meanwhile, orders for machinery were up 1.4%, while demand for computers and related products shot up 9.1%.

Overall, U.S. manufacturers have struggled this year due to the strength of the U.S. dollar and the plunge in energy prices—the higher value of the dollar against foreign currencies makes U.S. goods more expensive and less competitive in major export markets, while the lower oil prices have led energy companies to scale back investment plans.

Jennifer Lee, senior economist at BMO Capital Markets, describes the June results as “a glimmer of hope” that may point to “stronger business investment as the second half begins.”

Still, the U.S. economy stalled in the January-March quarter, with the gross domestic product shrinking at an annual rate of 0.2%. Analysts blame the weakness on a number of temporary factors, including a harsh winter. As such, they expect growth to rebound to [about] 2.5% in the April-June quarter.

On Thursday, the government will release its first estimate of GDP growth for the spring.

Originally published on Advisor.ca

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