WASHINGTON – Economic reports Thursday offered encouraging signals about U.S. factories, jobs and underlying demand in the economy ahead of a much-anticipated report on national output Friday.
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Orders for durable goods -- big-ticket items like refrigerators and bulldozers -- grew 6.5% in June, the Commerce Department said. That marked the biggest jump in nearly three years. Separately, the nation's trade deficit in goods narrowed 3.7% last month as exports rose sturdily and imports fell, the agency said.
Meanwhile, the Labor Department said jobless claims -- a measure of layoffs across the U.S. -- have held near four-decade lows, showing a tight labor market overall despite a rise of 10,000 in the past week to 244,000.
The data boosted hopes for a strong report from the Commerce Department Friday on gross domestic product in the second quarter. Economists polled by The Wall Street Journal project that GDP -- the broadest measure of goods and services made in the U.S. -- expanded at a 2.7% annual pace in April through June.
After Thursday's data, some economists lifted projections to 3% and above. Such growth would be more than double the first quarter's 1.4% gain. And it would put the economy in familiar terrain. In recent years and for various reasons, output has often risen slowly at the start of the year, rebounded in the spring and then settled into firm but modest growth in the second half.
"The economy is on a 2% growth path...the same path it's been on since 2010," said Patrick Newport, economist at IHS Markit. "The economy is nearing full employment and so we're not going to see surges in growth because we just don't have the labor force to make that happen."
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Several factors are working in the economy's favor of late. After two years of turmoil, oil markets have stabilized. That has pushed energy companies to renew drilling, in turn stoking demand for equipment and labor.
A booming stock market and rising business confidence also may have led to a modest pickup in business spending on equipment in the second quarter. Meanwhile, stronger growth in Europe and Asia are pushing up demand for U.S. goods. The weakened dollar, which makes U.S. goods cheaper globally, has also helped exports.
But there are reasons for caution. Thursday's report on durable goods showed that higher demand last month was largely contained in one, volatile segment -- aircraft. Sales of civilian aircraft soared, reflecting better business at aircraft makers such as Boeing Co. that are benefiting from a rise in global passenger airline traffic and higher sales of jetliners.
Excluding transportation, orders rose 0.2%. Sales of computers and cars fell last month, though each are up modestly overall this year compared with the same period last year.
And while businesses stepped up investment in the second quarter overall, they retreated at the end of the quarter. Orders for nondefense capital goods excluding aircraft, a proxy for spending on equipment and software, fell 0.1% after two months of solid gains. That marked the first drop since December.
Ben Leubsdorf contributed to this article.
Write to Josh Mitchell at email@example.com
(END) Dow Jones Newswires
July 27, 2017 13:35 ET (17:35 GMT)