--US May durable goods orders +2.9%; ex-transportation +2.7%
--US May transportation equipment orders +3.4%
--US May aircraft and parts orders +2.9%
--US May metals orders +5.9%; machinery +2.6%
--US May computers and electronic equipment orders +2.7%
--US May semiconductor orders +35.3%, communication tools -11.5%
--Ex-defense, US May durable goods orders +2.9%
--Ex-defense, US May capital goods shipments +2.0%
--Ex-defense, US May capital goods orders +0.9%
--US May durable goods shipments +3.1%; inventories -0.5%
--US April durable goods orders revised to -5.5%, from -5.0%

By Andrew Williams
Washington, June 26 (BridgeNews) - The factory sector showed unexpected signs of strength in May as orders for durable goods rebounded 2.9%, confounding the 0.4% drop analysts were expecting and partly reversing the 5.5% decline in April orders, the Commerce Department said Tuesday. Excluding transportation, durable goods orders rose 2.7% in May.
Among analysts surveyed by BridgeNews, forecasts for new orders ranged from down 2.7% to up 1.5%.
"Transportation equipment had the largest increase...due to motor vehicles and parts," Commerce said. Transportation orders posted a 3.4% increase in May, led by a 7.4% surge in orders for cars and car parts. New orders for aircraft and parts were up 2.9%.
Meanwhile, orders for computer and electronic products, rose 2.7% on a 35.3% increase in demand for semiconductors. New orders for semiconductors had plunged 40.0% in April. However, orders for communications equipment dropped 11.5% in May.
Elsewhere, new orders for primary metals were up 5.9%, orders for machinery rose 2.6% and orders for fabricated metal products gained 1.2%. New orders for non-defense capital goods were up 0.9% for the month, while shipments were up 2.0%. Non-defense capital goods orders and shipments were down 5.5% and 5.0%, respectively, in April.
The May durable goods report marks a patch of unexpected strength in the manufacturing sector, which has been mired in recession this year. Durable goods orders have now risen in three of the past four months. Declining business investment up to this point has been a key reason the Fed has cut its fed funds short term interest rate by a half percentage point five times so far this year. Tuesday's data, however, may support calls for a less aggressive quarter point interest rate cut Wednesday.

INVENTORIES Shipments of durable goods--items with a lifespan of more than three years--rose 3.1%, while unfilled orders fell 0.7%. In May, inventories at durable goods producers fell 0.5%. The inventory reductions signal that factory stocks may soon be in balance again, laying the groundwork for an economic recovery.