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May 28, 2008
Durable Goods Orders Rise - Unexpectedly
Analysts are claiming that foreign companies are buying more American factory goods and cushioning the blow for many. If so, it is because of a very weak dollar and probably can't last.
However, it is still a spot of good news on the economy that few expected:
Orders for U.S. durable goods excluding cars and planes unexpectedly rose in April, signaling that international customers are helping factories ride out the economic slowdown.
Excluding transportation orders that tend to be volatile, bookings for goods meant to last several years rose 2.5 percent, the most since July, the Commerce Department said today in Washington. Total orders fell a less-than-forecast 0.5 percent.
Exports are keeping the economy from shrinking as American manufacturers grapple with the slowest economic growth in seven years and oil costs that have doubled in the past 12 months. Dow Chemical Co., the largest U.S. chemical maker, said today that surging expenses mean it will raise prices by as much as 20 percent.
"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 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,'' he said.
The report will be welcomed at the Fed who had been contemplating yet another rate cut to deal with the downturn in business. What the durable goods report reveals is a world economy that no longer rises and falls along with America's economy. The "euro zone" showed strong growth last quarter as did parts of Asia which allowed them to purchase goods at bargain prices here because of the weak dollar.