US factory orders fall; core capital goods orders revised up

Factory goods orders dropped 0.8 per cent, said the Commerce Department

New orders for US-made goods fell more than expected in May, but orders for capital equipment were a bit stronger than previously reported, suggesting the manufacturing sector remained on a moderate growth path.

Factory goods orders dropped 0.8 per cent, the Commerce Department said on Wednesday after a revised 0.3 per cent decline in April. It was the second straight monthly decrease in orders.

Economists polled by Reuters had forecast factory orders falling 0.5 per cent in May after a previously reported 0.2 per cent drop in April.

Factory orders were up 4.8 per cent from a year ago.

Manufacturing, which accounts for about 12 percent of the US economy, is losing momentum after gaining steam since mid-2016 amid a recovery in the energy sector that led to the demand for oil and gas drilling equipment.

Activity is slowing against the backdrop of a moderation in oil prices and declining motor vehicle sales. Motor vehicle manufacturers reported on Monday that auto sales fell in June for a fourth straight month, leading to a further increase in inventories, which could weigh on vehicle production.

Wednesday's report from the Commerce Department also showed orders for non-defense capital goods excluding aircraft - seen as a measure of business spending plans - rising 0.2 per cent

instead of slipping 0.2 per cent as 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, nudged up 0.1 per cent instead of the previously reported 0.2 per cent decrease.

Moderate capital expenditure comes despite relatively strong business confidence. A survey this week showed a measure of factory activity rising to a near three-year high in June.

In May, orders for machinery jumped 1.1 per cent. Mining, oilfield and gas field machinery orders surged 8.5 per cent.

Orders for electrical equipment, appliances and components increased 1.0 per cent and orders for primary metals advanced 0.6 per cent. Orders for transportation equipment fell 3.0 per cent.

That was the biggest drop since last November and reflected an 11.6 per cent tumble in nondefense aircraft orders. Motor vehicle orders gained 0.1 per cent after rising 0.9 per cent in April. Unfilled orders at factories fell 0.2 per cent after two straight monthly increases.