Orders for US durable goods expected to rebound in June after May slip

The Commerce Department reports on business orders for durable goods in June. The report will be released at 8:30 a.m. EST Friday.

ORDERS REBOUND: The forecast is that durable goods orders rose 0.6 percent in June, according to a survey of economists by data firm FactSet.

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MAY SLIP: Orders tumbled in May as demand for military equipment fell sharply. Excluding defense-related equipment, however, orders rose. And a key category that signals business investment increased by a solid 1.1 percent on a seasonally adjusted basis.

The gains outside of military goods suggested that business spending is picking up, which could boost the economy.

The overall economy went into reverse in the January-March quarter, with output shrinking at an annual rate of 2.9 percent. That reflected in part a severe winter that disrupted U.S. economic activity, from factory production to shopping.

Economists believe that growth rebounded to a rate of around 2.9 percent in the April-June quarter and they are looking for momentum to build even more in the second half of this year.

The optimism is based on a belief that the five-year-old economic recovery is finally gaining traction, with businesses confident enough to step up hiring. That uptick in hiring is expected to power stronger consumer spending and more factory production.

The government reported that factory output increased for a fifth straight month in June as manufacturers cranked out more aircraft, chemicals and furniture. For the April-June quarter, manufacturing output accelerated to the fastest pace in more than two years and economists are looking for further gains in the months ahead, reflecting strong demand for autos and increased spending by businesses on new equipment.

A surprisingly resilient jobs report for June showed that factories added 16,000 positions, the most in four months, and the average work week for manufacturing employees remained at a post-recession high.

The Institute for Supply Management reported that its closely watched manufacturing index expanded in June for a 13th straight month with growth broad-based across nearly all of the 18 sectors that the index covers.