Instant view: Transportation buoys durable goods orders

(Reuters) - New orders for long-lasting U.S. manufactured goods rose more than expected in May as bookings for transportation equipment rebounded strongly, according to a government report on Friday that could allay fears of a sharp slowdown in factory activity.

U.S. economic growth was revised modestly higher in the first quarter to account for a slightly faster pace of restocking by businesses and a smaller increase in imports, government data showed on Friday, but remained anemic.

COMMENTS:

ROGER VOLZ, DIRECTOR OF CASH EQUITIES AT BGC FINANCIAL IN NEW YORK

"Enough to lift us off over the overnight lows, and it was better than expected. Cap good orders were also better than expected, though ex-transportation was a little light. This is giving us a bit of a relief bounce off the lows, but is it enough to turn us? That depends on how the headlines develop throughout the day."

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA

"I think it's consistent with a slow path in economic growth. These numbers tend to be really choppy and uneven. The market was braced for much worse news. We got a pretty positive surprise."

MICHAEL BROWN WELLS FARGO, CHARLOTTE, NORTH CAROLINA

"What we're are seeing is a nice bounce back from the contraction last month, from the supply disruptions we faced from Japan.

"The most positive information we can glean from this is capital goods, which is up 5.6 percent compared to the 5.4 percent decline we observed last month.

"Capital goods orders feeds into business fixed investment, which has been posting fairly strong economic gains over the past quarters.

NIGEL GAULT, CHIEF U.S. ECONOMIST, IHS GLOBAL INSIGHT, LEXINGTON, MASSACHUSETTS

"The key thing to look at is always non-defense capital goods excluding aircraft, up 1.6 percent. That's OK, it's not a great month, but at least it's moving in the right direction. A little better than you might have expected given the gloomy news that's coming out of the manufacturing surveys. So that's a small plus.

"We also have got an improvement in the shipments of non-defense capital goods ex-aircraft, reversing May's decline. That goes straight into the GDP calculation, so that's helpful for the GDP but it does mean over the last two months that spending has been roughly flat.

"So overall it's up, it may be slightly better than expected, it's not great but it is better than you would have expected given the manufacturing surveys you've seen recently.

"Certainly the next month or so of data from what we've seen in the early regional manufacturing surveys for June and the latest surveys of the labor market that at least the next month of data doesn't look like it's going to be good. We'll have a very weak ISM and then another poor employment report."

KURT KARL, CHIEF U.S. ECONOMIST, SWISS RE, NEW YORK

"There was a little improvement in the GDP annualized and the durables goods orders are better than expected. A punch from aircraft but even non-defense ex-aircraft is doing well so the capital goods outlook is pretty strong. It is a good report. That is for May which would be post the shock of Japan.

"What I am seeing is a turning around. We had a lot of bad news at the beginning of the year, initially it was oil prices and then it was Japan, and some of the things have been price impacts with the weak dollar. There has been a whole bunch of little negatives, but the way I'm looking at it is these negatives are all temporary."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"After orders for durable goods dropped 2.7% in April, May manufacturing activity mustered to recover most of the decline, as orders grew by 1.9%. This is an encouraging report considering the influx of manufacturing surveys suggesting an impending slowdown in the industry, and April's decline was upwardly revised from an original decline of 3.6%. However, the good tone may not follow reflecting June data."

MARKET REACTION: STOCKS: U.S. stock index futures rise. BONDS: U.S. bond prices extend losses. FOREX: The euro pares losses versus dollar.

Posted in: Business-Economic