US factory orders unexpectedly fall in May
NEW orders for US-manufactured goods unexpectedly fell in May, while business spending on equipment appeared weaker than initially thought, government data showed on Wednesday (Jul 3).
Factory orders dropped 0.5 per cent after rising 0.4 per cent in April, the Commerce Department’s Census Bureau said. Economists polled by Reuters had forecast factory orders would gain 0.2 per cent.
Manufacturing, which accounts for 10.3 per cent of the US economy, is under pressure from higher interest rates and softening demand for goods. government data last week showed manufacturing contracted at a 4.3 per cent annualised rate in the first quarter, with most of the decline coming from long-lasting manufactured goods.
A survey from the Institute for Supply Management on Wednesday showed its manufacturing PMI declined further in June, with the ISM describing manufacturers as demonstrating “an unwillingness to invest in capital and inventory due to current monetary policy and other conditions.”
The Federal Reserve has maintained its benchmark overnight interest rate in the current 5.25 to 5.5 per cent range since last July. The US central bank has hiked its policy rate by 525 basis points since 2022 to quell high inflation.
Orders for machinery fell 0.5 per cent in May. There were also decreases in orders for electrical equipment, appliances and components as well as primary metals. Orders for transportation equipment rose as did those for fabricated metal products.
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Shipments of manufactured goods fell 0.7 per cent, while inventories rose 0.2. Unfilled orders at factories climbed 0.2 per cent.
The government also confirmed that orders for non-defence capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment dropped 0.6 per cent in May, as reported last month.
But shipments of these so-called core capital goods slipped 0.6 per cent rather than by the previously reported 0.5 per cent.
SEE ALSO
Nondefence capital goods orders decreased 1.0 per cent, instead of 0.9 per cent, as initially estimated. Shipments of these goods tumbled 1.6 per cent instead of 1.5 per cent, as reported last week.
These shipments go into the calculation of the business spending on equipment component in the gross domestic product report. Business spending on equipment rebounded moderately in the first quarter after contracting for two straight quarters. REUTERS
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