US factory orders jump in June on transportation equipment demand

WASHINGTON (Reuters) – New orders for U.S.-made goods surged in June, boosted by strong demand for transportation equipment and other goods, showing some pockets of strength in manufacturing despite higher interest rates.

Factory orders increased 2.3% after rising 0.4% in May, the Commerce Department said on Thursday. Economists polled by Reuters had forecast orders would accelerate 2.2%. Orders advanced 0.9% on a year-on-year basis in June.

These so-called hard data suggest the manufacturing sector continues to hang on despite 525 basis points in rate hikes from the Federal Reserve since March 2022.

But sentiment surveys suggest that manufacturing, which accounts for 11.1% of the economy, is in recession.

The Institute for Supply Management said on Tuesday that its manufacturing PMI contracted for the ninth straight month in July, the longest such stretch since the 2007-2009 Great Recession. Spending on long-lasting manufactured goods has slowed after booming during the COVID-19 pandemic, with services like airline travel and visits to amusement parks now in favor.

But some areas of strength remain. Orders for transportation equipment jumped 12.0% in June after rising 4.2% in the prior month. Civilian aircraft orders soared 69.4%, while motor vehicle orders rose 0.9%.

Orders for computers and electronic products increased 1.6%. Electrical equipment, appliances and components orders advanced 1.5%. But machinery orders fell 0.2%.

Shipments of manufactured goods edged up 0.1% in June. The inventory of manufactured goods was unchanged. Unfilled orders at factories increased 1.8%, which should support production.

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, rose 0.1% in June, instead of 0.2% as reported in last month’s estimate.

Shipments of these so-called core capital goods inched up 0.1%. They were previously reported to have been unchanged. Business spending on equipment rebounded strongly in the second quarter after contracting for two straight quarters.

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