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US Factory Orders Surge in July

H.S. Borji
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New orders for US factory goods surged in July, led by a sharp increase in commercial aircraft, adding further evidence the manufacturing sector was a key driver of economic growth during the summer.

US factory orders advanced 10.5 percent in July, following an upwardly revised gain of 1.5 percent the previous month, the Commerce Department reported today in Washington. The reading was slightly below the consensus estimate, which called for a gain of 11 percent.

Excluding transportation equipment, new orders declined 0.8 percent, official data showed.

Shipments increased 1.2 percent in July, while inventories edged up 0.1 percent. The inventories-to-shipments ratio edged down slightly to 1.29 from 1.30.

Last week the Commerce Department said durable goods orders rose in July to their highest level on record, as demand for Boeing jetliners led to a big increase in transportation equipment.

Orders for manufactured goods meant to last three years or more surged 22.6 percent to $300.1 billion, following an upwardly revised gain of 2.7 percent the previous month. That was the largest figure ever recorded under the current North American Industry Classification System.

Orders for transportation equipment jumped 74.1 percent to $133 billion, as aircraft manufacturers took 324 orders in July, the highest on record. Additionally, automobile orders rose 10.2 percent, rounding off a stellar month for the transportation industry.

Today’s figures add further evidence that US factories made a large contribution to economic growth during the summer. Latest industry data suggest there is no sign production is slowing.

The US manufacturing industry in August advanced at the fastest pace in more than three years, as new orders kept production levels elevated, which in turn supported another month of job creation.

The Institute for Supply Management’s manufacturing index rose 1.9 percentage points to 59, well above the consensus estimate. August marked the fourteenth consecutive month the manufacturing industry expanded.

Markit Group, a market research firm, corroborated ISM’s report on Tuesday when it said US manufacturing output rose in August to the highest level since April 2010. Markit’s US manufacturing PMI increased 2.1 percentage points to 57.9.

“Impressive new business and output gains were matched by a solid rebound in employment growth,” said Markit senior economist Tim Moore in a statement released on Tuesday. “The latest survey points to the fastest upturn in payroll numbers for around a year-and-a-half, highlighting that the manufacturing sector continues to have a positive impact on overall labor market conditions.”

Strong factory activity will likely translate into broader economic growth in the third quarter, offsetting an unexpected decline in consumer spending in July. Consumer spending declined 0.2 percent in July, largely a reflection of weak personal income growth.

Revised second quarter GDP estimates showed the US economy accelerated at an annual rate of 4.2 percent in the second quarter, higher than the initial estimate showing a 4 percent gain. That more than offset a disappointing first quarter, when GDP contracted at an annual rate of 2.1 percent.

In a revised forecast released in June the Federal Reserve said the economy would grow at a rate of 2.1 percent to 2.3 percent this year.

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