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US factory orders post largest gain in six months

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New orders for US factory goods recorded their biggest increase in six months in April, boosted by demand for transportation equipment, while business spending on capital goods was not as weak as initially thought.

[WASHINGTON] New orders for US factory goods recorded their biggest increase in six months in April, boosted by demand for transportation equipment, while business spending on capital goods was not as weak as initially thought.

The Commerce Department said on Friday new orders for manufactured goods increased 1.9 per cent, the largest increase since October, suggesting the sector was starting to stabilize. March's orders were revised to show a 1.7 per cent increase instead of the previously reported 1.5 per cent gain.

April's rise was in line with economists' expectations.

The department also said orders for non-defense capital goods excluding aircraft fell 0.6 per cent in April instead of the 0.8 per cent drop reported last month.

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These so-called core capital goods are seen as a measure of business confidence and spending plans on equipment. Core capital goods shipments, which are used to calculate business equipment spending in the GDP report, rose 0.4 per cent in April rather than the 0.3 per cent gain reported last month.

Manufacturing, which accounts for about 12 per cent of the economy, has been squeezed by a strong dollar and weak global demand, which have undercut exports of factory goods, as well as efforts by businesses to reduce an inventory bloat.

The sector has also been hurt by spending cuts by energy firms as they adjust to reduced profits from cheaper oil.

In April, orders for transportation equipment surged 8.7 per cent, with bookings for motor vehicles and parts rising 2.4 per cent, the largest increase since July 2015.

Orders for machinery dropped 1.9 per cent, in part due to weak demand in the energy and agricultural sectors. But orders for electrical equipment, appliances and components rose 0.5 per cent. Orders for computers and electronic products jumped 2.4 per cent, the largest increase since March 2015.

Inventories of factory goods dipped 0.1 per cent, suggesting factories were making progress in reducing the inventory bloat. That could support future production at factories.

The inventories-to-shipments ratio fell to 1.36 in April, down from 1.37 in March. Unfilled orders at factories increased 0.6 per cent, while shipments of manufactured goods rose 0.5 per cent.

REUTERS

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