U.S. Factory Orders Unchanged in August
New orders for U.S.-manufactured goods were unchanged in August amid a drop in demand for transportation equipment, but solid gains elsewhere pointed to underlying strength in manufacturing. The Commerce Department said on October 4 the flat reading in factory orders, which matched economists’ expectations, followed a 1.0 decline in July. Orders increased 13.2% on a year-on-year basis in August. The report followed on the heels of a survey from the Institute for Supply Management on October 3 showing its manufacturing activity gauge fell to its lowest level in nearly 2-1/2 years in September, with measures of new orders and employment contracting.
Demand for goods is slowing amid higher interest rates and the rotation of spending back to services. Government data last September 30 showed spending on long-lasting manufactured goods barely rose in August, while outlays on services picked up.
The Federal Reserve has hiked its policy rate from the near-zero level at the beginning of this year to the current range of 3.00% to 3.25%, and last month signaled more large increases were on the way this year.
August’s factory orders were restrained by a 1.1% drop in orders for transportation equipment, which reflected a 18.5% plunge in bookings for civilian aircraft. Motor vehicle orders slipped 0.2%. But orders for computers and electronic products increased 0.7%. Orders for electrical equipment, appliances and components rebounded 1.6%. Orders for machinery rose as did those for primary metal products.
The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 1.4% in August, instead of 1.3% 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, rose 0.4% in August instead of 0.3% as previously reported.
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