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WASHINGTON (Reuters)-new orders for manufactured goods in the United States and a gauge of business plans for spending surged in may, easing fears of a sharp slowdown in factory activity.
Durable goods orders increased 1.9 percent after dropping the 2.7 per cent in April, the Commerce Department said on Friday, with a strongly rebounding business expenditures.
An improvement across the Board in May and revisions to April figures that showed smaller declines as reported earlier, highlighted the underlying force in a sector that has fueled the economic recovery.
Economists expected durable goods orders, a leading indicator of health, production of 1.5 percent rise in May. Durable goods are items ranging from toasters to aircraft that are intended for three years or more.
The report came as a relief to investors after recent data had shown regional factory some signs of fatigue.
Supply chain disruptions after the earthquake and tsunami of March in Japan were binding and production data on Friday suggested the impact of disasters may be waning.
The durable goods report also suggested that the economy was likely to regain the momentum that year.
"This supports our view that the economic ' soft patch ' not resist significantly in the second half," said Joseph LaVorgna, Chief U.S. economist at Deutsche Bank in New York.
"Also brings us to wonder if the recent, sharp declines in production of different calibers, such as the Empire of New York and Philly Fed survey, were a reaction to negative news in the neighborhood before."
The report better than expected, helped curb the losses on Wall Street, where stocks fell on concerns about the Italian banking sector and uncertainty over the passage of a Greek austerity plan.
The price for the debt of the Government of the United States were mostly higher, while the dollar climbed against a basket of major currencies.
GROWTH REVISED HIGHER TOUCH
Despite his role as leader, production only accounts for about 11.7 percent of U.S. gross domestic product and about 9 percent of total employment.
Obama administration and business leaders would like to once again become the main production of the u.s. economy, after losing out to emerging markets, where production costs are relatively low.
President Barack Obama on Friday launched an initiative to increase the production work by the Government in cooperation with companies and Universities to invest more than 500 million dollars in advanced technologies.
The economy grew at an annual rate of 1.9 per cent in the first quarter, the Department said in another report, up from a previously estimated 1.8 percent. That marked a sharp slowdown in the rate of 3.1 per cent in the fourth quarter.
The slowdown at the beginning of the year has lingered in the second quarter. The Federal Reserve on Wednesday cut its growth forecast for the U.S. economy both this year and next, while affirming the hope that some temporary restrictions would soon raise.
More clues about the health of the manufacturing sector will arrive next week in a series of regional surveys capped by Friday on national production data by the Institute for supply management.
Weak investigations by banks in New York and Philadelphia Federal Reserve raised the risk that the ISM index of national factory activity could contract in June after 22 months of expansion. Economists, however, are looking for a slowdown in activity, not a decline.
TRANSPORT ORDERS
Durable goods orders in May were a buoyed by 5.8 percent to bounce back in transport equipment, with the orders of a motor vehicle after immersion in 0.6 percent rise 5.3 percent in the previous month.
That suggested some improvements in the production of cars, which was hit by a shortage of parts from Japan.
Excluding transportation, durable goods orders rose 0.6 percent after falling a 0.4 per cent in April.
External transportation, orders for primary metals, machinery, equipment, electrical equipment and apparatus and computer and electronic products all rose.
Orders for non-defense capital goods excluding aircraft, a proxy for business spending closely guarded, rebounded to increase 1.6% last month, after the fall of a 0.8 per cent in April. Economists had expected an increase of 1.0 percent.
"Business continues to spend on new equipment, the only mystery is why you are adding to staff to run the machines that are buying," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
Shipments of capital goods orders excluding aircraft self-defense, that go into calculating the product of GDP, increased 1.4 percent after falling 1.5 percent in April.
(Edited by Neil Stempleman)
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