Any drop in durable goods orders, which are manufactured goods expected to last at least three years, eventually reduces the amount of goods produced by U.S. factories for shipment by dry van and flatbed trucks. Meanwhile, the Commerce Department said the revision in GDP was caused by updated figures on business investments and consumer spending, as well as inventories. Even though inventories are being reduced, there still is no guarantee a boost in production will occur. On Thursday night, Federal Reserve Chairman Alan Greenspan said the economy remains at risk of weakening more than anticipated, Reuters reported. However, he also believes the recent interest rate cuts should offer the economy some support by year-end.
Consumers appear to be counting on the positive effects of the rate cuts.
The University of Michigan's final May consumer sentiment index, which measures consumers' attitudes about the economy, rose to 92.0 in May from 88.4 in April, ending a slide that began late last year. The May expectations index, a barometer of how Americans feel about the twelve months ahead, rose to 85.4 in May from 82.2 in April. The preliminary reading was 86.5.