The surprising 2.5% increase in April durable goods excluding transport as well as the 4.2% advance in core capital goods makes for a strong report that contrasts with the ISM manufacturing data, economists say.

Eric Lascelles, senior economics and rates strategist at TD Securities, said the release is an "awfully strong looking report," noting the while "most measures are still flirting around zero," there was also "substantial growth" in a few key components.

In particular, Lascelles noted that machinery and primary metals advanced on a year-over-year basis by 16.6% and 8.6%, respectively. A monthly 28% gain was seen in electrical equipment as well, but Lascelles said that gain is mostly noise following a 19% gain in the prior month.



Meny Grauman, economist at CIBC World Markets, said the durable goods report is more accurate than the ISM manufacturing survey, as this is real data as opposed to a sentiment-based questionnaire. Nonetheless, he was reluctant to make firm conclusions about the manufacturing sector.

He said the details were positive and show that overseas demand remains elevated on account of the weak U.S. dollar. However, manufacturing is not on a good footing, he said, and he remains pessimistic about the second and third quarters of this year.

Ian Lyngen, interest rate strategist at RBS Greenwich Capital, said the 4.2% monthly advance in core capital goods, which excludes defence and aircraft orders, was "an impressive turnaround" that wiped out the preceding three months of declines. He called the rest of the report "much stronger than expected."

Lascelles said core figure is the most closely watched in the report and points towards a rebound in U.S. manufacturing activity, but it remains to be seen whether this level can be maintained in the months ahead.

Total sales of durable goods decreased by 0.5% in April, against expectations of a 1.5% decline and following an unrevised 0.3% decrease in March. April's decline was led by a 24.4% decline in nondefence aircraft, which contributed to an 8.0% monthly fall in the transportation figure.

"Ignoring monthly variations, the trend is still quite negative for both the overall economy and business investment, these numbers notwithstanding," Grauman added.

Excluding defence, orders were down 0.3% following a flat figure in the previous month.

Excluding transportation, shipments rose 1.3% after March's 0.2% fall, while shipments excluding defence rose by 1.0% after a 1.0% decline in March.

By Patrick McGee and edited by Nancy Girgis