WASHINGTON-Orders of big-ticket manufactured items continued to defy expectations to rise again in May, fueled by a sharp jump in orders for transportation equipment, according to US government data released the other day.
The figures underline the continued strength of some sectors of the American economy despite hikes in interest rates from the US Federal Reserve as it moves to tackle high inflation. Manufactured durable goods orders rose by 1.7 percent in May from a month earlier to $288.2 billion, the Commerce Department announced in a statement.
The increase was well above the median expectation of a fall in orders in a MarketWatch survey of economists.
“Durable goods orders have come in far stronger than implied by leading indicators and the survey data for three straight months now, making it hard to explain away the disconnect simply as noise,” Pantheon Macronomics senior US economist Kieran Clancy wrote in a note to clients.
The May increase was fueled by nondefense spending, with nondefense aircraft and parts orders growing by almost a third month-over-month.
New orders for nondefense capital goods and transportation equipment also saw substantial increases, while defense aircraft orders saw a steep decline month-over-month, following large gains in April.
“We thought these increases would be offset by a sharp decline in transport orders ex-autos and aircraft, following the 30% surge in April, but to no avail,” Clancy said. But the April jump “is entirely at odds with the flat trend in recent years, so a sharp drop in the months ahead due to mean-reversion still seems a reasonable bet,” he added.
Meanwhile, new home sales in the United States surged unexpectedly in May, the Commerce Department said Tuesday, reaching the highest rate in over a year despite efforts to cool the economy.
Sales of new properties have been rising in recent months, with a lack of inventory elsewhere pushing buyers into the market. May sales of new single-family houses jumped 12.2 percent over the previous month -- to a seasonally adjusted annual rate of 763,000 -- the Commerce Department said in a statement. That defied expectations of a decline, and is markedly higher than April’s revised rate of 680,000.
Compared with the same period a year ago, new home sales in May were 20 percent higher.
The median price of new homes sold also picked up to $416,300 in May, the Commerce Department added.
While monthly data can be volatile, sales of new homes have been higher on average in the second quarter than in the first, said Rubeela Farooqi, chief US economist at High Frequency Economics. Although higher mortgage rates have been a “headwind for buyers,” borrowing costs have come down from peaks, she added. With inventory of existing homes still tight, demand seems to be moving towards the sales of new properties.
“The existing home market is effectively frozen until mortgage rates drop considerably,” said Ian Shepherdson and Kieran Clancy of Pantheon Macroeconomics in a recent report.
A fall in rates would enable potential sellers to take action without incurring a massive increase in mortgage payments, the report added. “Once that happens, existing home inventory will spike from its currently depressed level, sales volumes will rise, and prices will fall,” the Pantheon economists said. But the timing of this development remains uncertain. The market for existing homes makes up the vast majority of the US market.