Factory orders rise for second straight month

Washington

NEW orders for US-made goods rose for a second straight month in June, but business spending plans on equipment were not as strong as initially thought, suggesting a further slowdown was likely in the third quarter.

Factory goods orders increased 0.7 per cent, boosted by strong demand for transportation equipment, electrical equipment, appliances and components as well as computers and electronic products, the Commerce Department said on Thursday. Factory orders increased by an unrevised 0.4 per cent in May.

June's rise in factory orders was in line with economists' expectations. Orders increased 8 per cent on a year-on-year basis in June.

But there are signs that manufacturing, which accounts for about 12 per cent of the US economy, is starting to slow as rising shortages of workers and import tariffs put pressure on the supply chain.

An Institute for Supply Management survey of manufacturers published on Wednesday showed a decline in production in July, with nearly all industries saying workers were scarce and that raw material prices had gone up because of tariffs on steel, aluminium and other imported products.

The Trump administration has imposed duties on steel and aluminium imports, provoking retaliation by trade partners including Canada, Mexico, China and the European Union. It has also slapped 25 per cent tariffs on US$34 billion of Chinese imports. Beijing retaliated with matching tariffs on the same amount of US exports to China.

In June, orders for transportation equipment increased 2.1 per cent, boosted by a 4.2 per cent jump in the volatile orders for civilian aircraft. Transportation orders fell 1.3 per cent in May. Orders for motor vehicles rose 0.9 per cent in June.

Orders for machinery were unchanged in June. There were decreases in orders for primary metals and fabricated metal products.

The Commerce Department also said June orders for non-defence capital goods excluding aircraft, which are seen as a measure of business spending plans, rose 0.2 per cent instead of increasing 0.6 per cent as reported last month. Orders for these so-called core capital goods climbed 0.7 per cent in May.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 0.7 per cent in June instead of surging 1.0 percent as reported last month. Core capital goods shipments edged up 0.1 per cent in May. Business spending on equipment slowed in the second quarter.

Another set of data released by the Labour Department showed that the number of Americans filing for unemployment benefits rose less than expected last week, pointing to sustained strength in the labour market despite trade tensions.

Initial claims for state unemployment benefits increased 1,000 to a seasonally adjusted 218,000 for the week ended July 28.

Claims dropped to 208,000 during the week ended July 14, which was the lowest reading since December 1969. Economists polled by Reuters had forecast claims rising to 220,000 in the latest week.

"Claims had started to move higher in mid-June, leading us to question whether it could be the fallout of protectionist measures," said Blerina Uruci, an economist at Barclays in Washington.

"The decline over the past few weeks, however, suggests no such effect on labor markets yet." Job growth averaged 215,000 per month in the first half of this year and the labor market is viewed as being near or at full employment. REUTERS