Recovery expected to continue despite report

CHICAGO – Analysts predict the U.S. manufacturing recovery will continue in the second half of the year, despite what a Reuters story yesterday termed a “surprisingly weak report on May durable goods orders.”

That prediction seems to support recent pronouncements from marine manufacturers, who have been busy adding employees and in some cases planning for production expansions.

Figures released by the Commerce Department Thursday, showed orders for durable goods, which are items meant to last three years or more, dropped unexpectedly in May, falling 1.6 percent after a 2.6 percent slide in April – the first back-to-back decrease in orders since November-December 2002, according to the article.

Analysts and economists, however, remained optimistic about the state of the economy, Reuters said.

“The numbers fly in the face of the broad strength that most of the companies are reporting in the manufacturing sector,” said Eli Lustgarten, analyst with J.B. Hanauer & Co., an independent equity research firm, in the story.

He cited the recent release of strong order numbers from Caterpillar Inc. (NYSE:CAT), which manufactures engines for several industries, including marine, as one example.

Changes in durable goods orders are measured month to month. The National Association of Manufacturers, a trade group representing 14,000 manufacturers, said new orders are still up more than 12 percent from a year earlier, despite the declines in May and April. Led by increases in both business investment and exports, manufacturing growth should outpace expansion in the overall economy by as much as 50 percent, NAM forecasted, according to Reuters.

Sung Won Sohn, chief economist at Wells Fargo Banks, called the weak durables data “an aberration” distorted by volatile swings in aircraft, auto and computer orders.

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