Factory Orders Rise as Business-Spending Plans Weaken

factory orders rise as business spending plans weaken
Factory Orders Rise as Business-Spending Plans Weaken

New orders for U.S.-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 percent, 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 percent in May.

June’s rise in factory orders was in line with economists’ expectations. Orders increased 8.0 percent on a year-on-year basis in June.

But there are signs that manufacturing, which accounts for about 12 percent of the U.S. 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, aluminum and other imported products.

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

In June, orders for transportation equipment increased 2.1 percent, boosted by a 4.2 percent jump in the volatile orders for civilian aircraft. Transportation orders fell 1.3 percent in May. Orders for motor vehicles rose 0.9 percent 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-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, rose 0.2 percent instead of increasing 0.6 percent as reported last month. Orders for these so-called core capital goods climbed 0.7 percent in May.

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

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Author: HEDGE

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