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Factory goods orders increase 0.4% in May

Washington

NEW orders for US-made goods unexpectedly rose in May, pointing to a strengthening manufacturing sector, but business spending on equipment continued to show signs of slowing.

Factory goods orders increased 0.4 per cent amid strong demand for machinery, the Commerce Department said on Tuesday. Data for April was revised up to show orders falling 0.4 per cent instead of the previously reported 0.8 per cent decrease.

Economists polled by Reuters had forecast factory orders to be unchanged in May.

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Orders increased 8.7 per cent on a year-on-year basis in May.

Manufacturing, which accounts for about 12 per cent of the US economy, is being boosted by strong domestic and global demand, but growing shortages of workers as well as import tariffs are starting to strain the supply chain.

The Trump administration has imposed tariffs on a range of imported goods, including steel and aluminium, to protect domestic industries from what it says is unfair competition from foreign manufacturers.

President Donald Trump's "America First" trade policy has left the United States embroiled in tit-for-tat tariffs with its major trading partners, including China, Canada, Mexico and the European Union.

An Institute for Supply Management (ISM) survey of manufacturers published on Monday showed bottlenecks in the supply chain, with a measure of supplier deliveries hitting its highest level since May 2004.

Manufacturers said the tariffs and "lack of predictability"of trade policy were causing "general business instability" and were a "drag on growth for investments". They also complained about an acute shortage of workers, especially truckers, and some manufacturers said transportation costs had "gone through the roof" as a result.

Business spending on equipment is slowing after double-digit growth in the second half of 2017. The moderation in business spending on equipment could undercut the White House's argument that lower corporate tax rates would boost investment.

Some companies like Apple Inc have used the tax windfall for share buybacks and dividends. REUTERS