Thursday, June 24, 2004

Durable goods are still a reliable site of deflation and overproduction in the global economy.
U.S. orders for durable goods posted an unexpected drop in May, a government report showed Thursday, as weakness in demand for autos dragged the measure lower for a second straight month.

The Commerce Department said orders for durable goods -- those meant to last at least three years -- fell 1.6 percent in May after a revised 2.6 percent decline in April. Excluding transportation-related orders, however, orders were off a smaller 0.7 percent, Commerce said.

The slide took Wall Street by surprise. Analysts had been looking for a 1.4 percent gain in May.

The declines in May and April were the first back-to-back monthly drops in durables orders since November and December 2002, according to Commerce, and may raise doubts about the U.S. factory sector's recent revival. . . .

May's decline was not limited to transportation. Orders for computers and electronic products, machinery and fabricated metals all fell
Last week the General reported that year-over-year durable goods production in the US was +6.4% while prices shifted -3.1%. In manufacturing outside food (mostly dairy and beef) and energy, its lots more production without lots more consumption, the Betty Crocker recipe for deflation.


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