US factory orders rise solidly in June, beat expectations

NEW orders for US-manufactured goods increased solidly in June and business spending on equipment was stronger than initially thought, pointing to underlying strength in manufacturing despite rising interest rates.

The Commerce Department said on Wednesday (Aug 3) that factory orders rose 2.0 per cent in June after advancing 1.8 per cent in May. Economists polled by Reuters had forecast factory orders would increase 1.1 per cent. Orders increased 13.5 per cent on a year-on-year basis.

Manufacturing continues to grow, though its momentum has slowed as higher interest rates cool demand for goods. Spending is also reverting back to services. An Institute for Supply Management survey on Monday showed factory activity growing at a moderate pace in July, with a measure of new orders declining further as manufacturers worried about excess inventory.

The increase in orders occurred nearly across the board in June. Some of the rise reflected higher prices. Orders for computers and electronic products surged 1.7 per cent. Orders for electrical equipment, appliances and components rebounded 2.8 per cent.

There was also a 5.2 per cent jump in orders for transportation equipment, which reflected a surge in orders for defence aircraft and parts. But orders for primary metals fell 1.0 per cent.

Shipments of manufactured goods increased 1.1 per cent after rising 2.1 per cent in May. Inventories at factories climbed 0.4 per cent after increasing 1.3 per cent in the prior month. Unfilled orders increased 0.7 per cent following a 0.3 per cent gain in May.

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The Commerce Department also reported that orders for non-defence capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, rose 0.7 per cent in June instead of 0.5 per cent as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, advanced 0.7 per cent in June as previously reported.

Business spending on equipment declined in the second quarter, contributing to the second straight quarterly contraction in GDP. REUTERS