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US Factory Orders Rebound in June

H.S. Borji
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US Factory Orders Rebound in June

New orders for US factory goods rebounded faster than forecast in June, a sign manufacturing activity was expanding rapidly at the end of the second quarter.

US factory orders increased 1.1 percent in June, following a decline of 0.5 percent the previous month, the Commerce Department reported today in Washington. A broad consensus of economists said factory orders rose 0.6 percent.

Factors orders rose to $503.2 billion, the highest level since the series was first published under the North American Industry Classification System in 1992.

Shipments increased 0.5 percent to $499.8 billion, also the highest level since 1992.

Transportation orders increased 1.3 percent, and capital goods orders excluding aircraft advanced 3.3 percent, official data showed.

Excluding transportation equipment, factory orders jumped 1.1 percent, the largest increase since July 2013.

Inventories increased 0.4 percent to $399.6 billion, following a 1 percent decline the previous month.

Unfilled orders, having increased in 14 of the last 15 months, rose 1 percent.

The Commerce Department revised its estimate of June durable goods orders to 1.7 percent, up from the 0.7 percent rise reported last month. The government reported a decline in core shipments last month, raising concern the US economy wasn’t recovering as quickly as initially forecast in the second quarter.

The US economy grew at an annual rate of 4 percent in the second quarter, the Commerce Department reported last week. The economy contracted at an annual rate of 2.1 percent in the first quarter.

Several factors weighed on growth in the first quarter, including negative contributions from private inventory investment, exports and government spending.

Last week’s GDP report was the fourth consecutive time the government has revised its estimate of first quarter growth.

The rebound in the second quarter was largely due to higher personal consumption expenditure, exports, private inventory investment and government spending.

Initial estimates suggest the US economy will expand 3 percent annually between July and September.

The Federal Reserve downgraded its growth forecast this year from nearly 3 percent to between 2.1 percent and 2.3 percent. However, policymakers are confident the economy will accelerate in the second half of the year.

Interest rates are expected to remain near zero until the middle of next year, although a stronger labour market recovery has boosted speculation the central bank could consider raising rates sooner than that.

Manufacturers added more than 12,000 payrolls last month, official data showed last week.

Manufacturing activity is expanding at a stronger pace this summer, helping the economy rebound from the weather-related slowdown at the start of the year. Last week the Institute for Supply Management said the US manufacturing sector expanded in July for the fourteenth consecutive month, as 17 of the 18 manufacturing industries reported growth.

ISM’s gauge of manufacturing activity rose from 55.3 to 57.1.

A separate ISM report released today showed the service economy last month reached its highest level since January 2008. The non-manufacturing purchasing managers’ index rose 2.7 percentage points to 58.7.

The new orders sub-index rose 3.7 percentage points to 64.9, the highest reading since August 2005.

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