Ahead of the Bell: Durable Goods

WASHINGTON - Orders to U.S. factories for big-ticket manufactured goods likely took a tumble in June, reflecting plant shutdowns in the troubled auto industry.

The consensus view of economists surveyed by Thomson Reuters is that durable goods dropped 0.6 percent in June. That would represent a setback after orders for durable goods, items expected to last at least three years, posted large increases in the past two months, including a 1.8 percent rise in May — the biggest increase since the recession began in December 2007.

Economists said they were forecasting a decline for June because of widespread shutdowns in the auto industry in May, reflecting huge inventories of unsold cars that have affected the entire industry and the particular troubles at General Motors Corp. and Chrysler LLC, which had brief stays under bankruptcy court supervision and have received a total of $65 billion in federal aid.

Adding to those problems, economists said that they were expecting the orders report for June to show that aircraft order cancellations exceeded incoming new orders.

Economists at IHS Global Insight said they believe orders for business capital goods excluding aircraft would show improvement in June but that these gains would not be enough to offset weakness in other areas. The Thomson Reuters consensus was that durable goods orders, excluding the volatile transportation sector, would be flat in June following a 1.1 percent rise excluding transportation in May.

The economy has been mired in its longest recession since the end of World War II but there have been increasing signs that the worst of the downturn may be over. The government is scheduled on Friday to report on overall economic output, as measured by the gross domestic product, for the April-June quarter.

The expectation was that GDP fell at an annual rate of 1.5 percent during that period, a much smaller decline than the 5.5 percent rate of decline in the first three months of this year.

Many economists believe that the economy will resume growing in the current July-September quarter although they expect unemployment, now at a 26-year high of 9.5 percent, to keep rising until early next year.

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