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US Factory Orders Decline Faster than Forecast in May

H.S. Borji
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New orders for US factory goods slipped faster than forecast in May, as declining demand for military equipment ended three consecutive months of gains.

US factory orders slipped 0.5 percent in May, after a revised gain of 0.8 percent the previous month, the Commerce Department reported today in Washington. A broad consensus of economists said factory orders declined 0.3 percent in May.

Excluding military equipment, new orders advanced only 0.2 percent.

Orders for transportation equipment declined 2.9 percent, official data showed.

Factory orders increased 2.5 percent over the previous year.

Factory orders had risen 1.5 percent in March and 1.7 percent in February.

Last week the Commerce Department said durable goods orders unexpectedly declined in May, pulled down by weak demand for military equipment.

Orders for manufactured goods meant to last three years or more declined 1 percent in May, following a gain of 0.8 percent the previous month. Economists forecast no change for the month of May.

Excluding transportation equipment, durable goods orders declined 0.1 percent, following an advance of 0.4 percent in April.

Non-defense capital goods excluding aircraft – a gauge of business spending – advanced 0.7 percent, official data showed.

Slow factory data raise concern the US economy isn’t rebounding as quickly as initially forecast. The US economy contracted 2.9 percent annually in the first quarter, capping off the worst three-month period since the start of 2009.

Weighing on GDP in the first quarter were negative contributions from private inventory investment, exports, government spending, nonresidential fixed investment and residential fixed investment. Contraction was exacerbated by a severe winter season that gripped economic activity throughout the United States.

Economists say the slowdown is only temporary and that growth should return to normal in the second quarter.

Despite the slowdown, US factories remain busy. The US manufacturing sector expanded for the thirteenth consecutive month in June, driven by higher production and new orders, the Institute for Supply Management reported Tuesday. ISM’s gauge of national manufacturing activity dipped slightly from 55.4 to 55.3.

Fifteen of the 18 manufacturing sub-sectors reported growth in June, led by furniture and related products, nonmetallic mineral products and food, beverage and tobacco products, ISM data showed.

In a separate survey, Markit Group confirmed the US manufacturing sector expanded at its fastest pace in more than four years, as output and new orders rose sharply. Markit’s manufacturing PMI indicator was revised slightly from 57.5 to 57.3 in June.

Manufacturers added 10,000 payrolls in May, as the overall US economy added 217,000 jobs. May marked the fourth consecutive month the US economy added more than 200,000 jobs, the longest stretch since 1999.

On Wednesday the ADP Institute said US employers added 281,000 payrolls in June, well above the median estimate of 200,000.

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