US factory orders fall more than expected on transportation

[WASHINGTON] New orders for US factory goods fell more than expected in May on weak demand for transportation and electrical equipment, a sign that manufacturing remained mired in a soft patch.

The Commerce Department said on Thursday new orders for manufactured goods dropped 1.0 per cent after a revised 0.7 per cent decline in April. Factory orders have dropped in nine of the last 10 months.

Economists had forecast orders falling 0.5 per cent in May after April's previously reported 0.4 per cent drop.

Excluding the volatile transport component, orders nudged up 0.1 per cent in May, reversing April's 0.1 per cent decline.

Manufacturing, which accounts for about 12 per cent of the US economy, is struggling with the lingering effects of a strong dollar and lower crude oil prices, which has squeezed profits of multinational corporations and oil-field firms.

There are signs, however, the sector is starting to stabilize. A report on Wednesday showed the Institute for Supply Management's national factory activity index rose to a five-month high in June. A sub-index of new orders increased for a third straight month.

In addition, the rout in the energy sector looks close to running it course as crude oil prices recover after falling nearly 60 per cent from June last year to March. Energy firms pulled only three rigs from U.S. oil fields last week, the smallest number in five weeks.

The Commerce Department report showed orders for transportation equipment tumbled 6.5 per cent in May. Orders for electrical equipment, appliances and components fell 2.8 per cent.

The department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - fell 0.4 per cent instead of the 0.4 per cent gain reported last month.

It was the second straight month of decline in these so-called core capital goods.

Shipments of core capital goods, used to calculate business equipment spending in the gross domestic product report, were revised down to show a 0.1 per cent dip in May instead of the previously reported 0.3 per cent rise.

REUTERS