Transports drag down durable goods in May

New durable goods orders declined in May, driven by a downward trend in aircraft demand. But core capital goods, a measure of business investment, saw a slight uptick of 0.4%.

​​Orders for long-lasting equipment, such as cars and appliances, dropped a seasonally adjusted 1.8% to $228.9 billion in May, the Census Bureau said Tuesday. The $4.1 billion slide was greater than the 1.5% economists' estimated in a MarketWatch survey.

The dip was largely due to a 35.3% decline in commercial aircraft orders, said economists.

"We already knew that Boeing reported orders for only 11 planes last month, nearly all of which were the cheapest 737s," wrote Paul Ashworth, economist at research firm Capital Economics, in a note.

But controlled for transportation spending, business investment was actually on the rise. Excluding transportation, orders increased 0.5%, in line with estimates, with capital goods up 0.4%.

The monthly survey of major manufacturers can be viewed as a measure of confidence from business owners, who only invest in long-term, large purchases when they expect business to grow. In April, orders fell 0.5% and were revised downward in Tuesday's report, again dragged down by aircraft.

May's results showed yet another mixed month for the U.S. manufacturing sector, wrote Jim O'Sullivan, economist at research firm High Frequency Economics, after the New York and Philadelphia Federal Reserves reported lukewarm findings in the past few weeks.

On the plus side, researchers at Barclays saw some signs of stabilization in the results. A strong dollar made U.S. exports more expensive for foreign buyers, posing a challenge to manufacturers on top of winter weather, labor disputes, and reduced demand from refineries as oil prices plummeted in the first half of the year.

With goods like metals and machinery seeing a second straight month of increased demand, the drag of the strong dollar could be waning, Barclays analyst Jesse Hurwitz wrote in a note.