Industrial output cooling as durable goods lose a little ground

Highlighting the disparity between government statistics and the real world, orders for durable goods fell an estimated 2.8% in May, led by reductions in the orders for aircraft, metals and machinery. It is speculated that some of the decline is due to a productivity spike in April which has temporarily raised inventories in an economy which is entering a cooling phase. Adding to the statistical decline is a reduction in steel orders which had surged through the first quarter as manufacturing interests bolstered their inventories of raw materials both domestically and abroad.

Economists are still forecasting higher levels of corporate investment and from what I see, that's true. Companies are looking to renew and refine their interior operations and are aggressively seeking improvements to revenue flow. The investments to that end however are falling into the categories of infrastructure, R& D and sales rather than increased output capacity, leading to reductions in workforce, not increases in production machinery. Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts stated, "Capital spending is not moving forward with the strength we had hoped.''