U.S. factory orders drop for second straight month

by Ike Obudulu Posted on July 4th, 2019

Washington: New orders for U.S.-made goods fell for a second straight month May while shipments barely rose, pointing to continued weakness in manufacturing.

Factory goods orders decreased 0.7%, weighed down by weak demand for transportation equipment, the Commerce Department said on Wednesday. Data for April was revised sharply down to show factory orders falling 1.2% instead of slipping 0.8% as previously reported.

Economists had forecast factory orders falling 0.5% in May. Factory orders rose 0.9% compared to May 2018. Manufacturing, which accounts for about 12% of the economy, is struggling amid an inventory bloat, trade tensions between the United States and China, and a reduction in the production of Boeing’s 737 MAX aircraft. The weak factory orders data was flagged by a report last month showing the second straight monthly drop in demand for long-lasting manufactured goods in April, as well as a drop in manufacturing production.

A survey on Monday showed a measure of national factory activity dropped to a near three-year low in June, with manufacturers expressing concern over the U.S.-China trade tensions. Transportation equipment orders dropped 4.6% in May after tumbling 7.6% in April. Orders for civilian aircraft and parts declined 28.2%. There were increases in order for computers and electronic products and machinery.

The Commerce Department also said May orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, rose 0.5% instead of the 0.4% gain reported last month.

The report said orders for durable goods slumped by 1.3 percent in May after tumbling by 2.8 percent in April, unrevised from the preliminary data published last week.

Orders for transportation equipment led the way lower once again, plummeting 4.6 percent in May following a 7.6 percent nosedive in April.

The Commerce Department said orders for non-durable goods also edged down by 0.2 percent in May after rising by 0.4 percent in the previous month.

Shipments of manufactured goods inched up by 0.1 percent in May after falling by 0.6 percent in April, while inventories of manufactured goods rose by another 0.2 percent.

With inventories rising by slightly more than shipments, the inventories-to-shipments ratio ticked up to 1.38 in May from 1.37 in April.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 0.6% in May instead of 0.7% as previously reported. Overall shipments of manufactured goods edged up 0.1% in May after dropping 0.6% in April.

Factory Orders

This report contains a revision of the Durable Goods Orders data released about a week earlier, and fresh data regarding non-durable goods.

Factory Orders report measures change in the total value of new purchase orders placed with manufacturers.

Traders care because it’s a leading indicator of production – rising purchase orders signal that manufacturers will increase activity as they work to fill the orders;

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