Orders for durable goods drop 1.8 percent in May as demand for aircraft plummets

Energy Associated Press

Orders to U.S. factories for long-lasting manufactured goods fell in May, pulled down by a sharp drop in demand for aircraft. But a category that reflects business investment rose last month, a hopeful sign for manufacturing.

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The Commerce Department said Tuesday that total orders for durable goods dropped 1.8 percent in May after falling 1.5 percent in April. Last month's drop was caused in part by a 35.3 percent plunge in orders for aircraft, which is often a volatile category. Excluding transportation, orders rose 0.5 percent.

A key category that tracks business investment plans — orders for non-military capital goods excluding aircraft — rose 0.4 percent in May, reversing a 0.3 percent drop in April.

American factories have struggled this year in part because a strong dollar has made U.S. goods more expensive overseas. Cheaper oil prices also mean energy firms are buying less equipment. So far this year, durable goods orders are down 2.2 percent from January-May 2014. The category that tracks business investment is down 2.6 percent through May this year.

Last week, the Federal Reserve said manufacturing output dropped 0.2 percent in May.

The Federal Reserve Bank of New York also reported that factory activity in New York state contracted in June. But factories around Philadelphia expanded this month at the fastest pace since December, the Philadelphia Fed reported last week.

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Despite their troubles, factories keep hiring, though at modest levels. The Labor Department reported that manufacturers have added jobs 22 straight months through May, longest streak since the late 1970s.