September 26, 2020

U.S. Factory Orders Suggest Manufacturing Is Improving

The Commerce Department said on Tuesday that factory orders rose 2.1 percent in May. April’s increase was revised higher, to 1.3 percent from 1 percent.

Most of the increase in May was because of a big jump in commercial aircraft demand. Still, businesses also ordered more machinery, computers and household appliances.

A category of orders that is viewed as a proxy for business investment plans — which excludes the volatile areas of transportation and defense — rose 1.5 percent. That rise was even stronger than the gains in the previous two months.

This measure of business investment had not increased for three straight months since the fall of 2011. The consecutive gains suggest manufacturing in the United States could improve in the second half of the year.

Despite its boost to the economy in the first three years after the recession ended, manufacturing has struggled this year. American factories have seen less demand for exports because of a weaker global growth. And businesses reduced their investment in machinery and equipment in the first quarter.

The May report showed that orders for long-lasting goods, like power generation equipment and ships, rose 3.7 percent in May. Orders for nondurable goods, including paper, chemicals and oil, rose 0.7 percent.

Demand for commercial aircraft increased about 51 percent, after a 18.4 percent gain in April and a drop of 43.3 percent in March.

Orders for autos and auto parts fell 2 percent, after jumping 4.1 percent in April, but the decline is most likely temporary.

American automakers on Tuesday reported healthy sales gains in June. Ford Motor’s sales soared 13 percent in June compared with a year earlier. Chrysler’s sales rose 8 percent. The numbers suggest that auto production will resume a healthy pace in the next months.

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