The Economy May Be Able To Escape The Dreaded Economic 'Soft Patch'

The month of May started with a wave of economic data that suggested the U.S. was heading for an economic slow down, or “soft patch,” in Q2.

However, this week was met with a string of better-than-expected data.

Just this morning, we learned that durable goods orders jumped 3.3% in May, crushing expectations for 1.5%.

Non-defence capital goods orders excluding aircraft, which is a key measure of business investment, jumped by 1.2%, which was much stronger than the expectation for a modest 0.5% gain.

Gennadiy Goldberg of TD Securities is encouraged by this.

“Stronger core durable goods orders suggest that the order pipeline that will drive future investment and inventory growth continues to improve, helping to fuel the transition out of the current soft patch,” wrote Goldberg.

“The details of the report offer room for encouragement, with all major sub-components showing monthly gains following the March pullback. Machinery orders rose 1.9% in April, bucking a 2 month declining trend as orders for computers and electronics also rose at a very strong 3.6% monthly rate. The inventory/shipments ratio rose to 1.66 from 1.65 in March, though the rise came as a function of weaker shipments.”

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