Transportation equipment buoys US factory orders in June

AUG 4, 201510:07 PM

[WASHINGTON] New orders for US factory goods rebounded strongly in June on strong demand for transportation equipment and other goods, a hopeful sign for the struggling manufacturing sector.

The Commerce Department said on Tuesday new orders for manufactured goods increased 1.8 per cent after a revised 1.1 per cent decline in May. The increase was in line with economists' expectations. May factory orders were previously reported to have dropped 1.0 per cent.

Factory activity has been stymied by a strong dollar and spending cuts in the energy sector after last year's sharp plunge in crude oil prices. Tepid global demand also has weighed on manufacturing, which accounts for about 12 per cent of the domestic economy.

Those factors have eroded the profits of multinational companies like Caterpillar Inc, Procter & Gamble Co , the world's largest household products maker, and Whirlpool Corp, the global home appliances giant.

Orders for transportation equipment surged 9.3 per cent in June, reflecting strong demand for aircraft. There also were increases in orders for machinery and electrical equipment, appliances and components.

The department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - increased 0.7 per cent instead of the 0.9 per cent rise reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 0.3 per cent in June. Shipments were previously reported to have dipped 0.1 per cent.

The upward revisions to core capital goods shipments, combined with a report on Monday showing stronger construction spending in May than previously reported, suggest second-quarter GDP could be revised higher when the government publishes its second estimate later this year.

The Commerce Department reported last week that the economy expanded at a 2.3 per cent annual pace in the second quarter.

REUTERS