Factory orders rose 1.8% in June on strong aircraft demand

August 05 01:07 2015

Orders to U.S. factories increased in June, and a key category that reflects business investment plans posted a modest rise. But the gains weren’t robust enough to suggest that the sluggish manufacturing sector is mounting a significant turnaround. Factory orders advanced 1.8% in the month, the Commerce Department reported Tuesday. The jump, however, was fueled by a surge in demand for commercial aircraft, a volatile sector that can swing widely from month to month.AP ECONOMY MANUFACTURING A USA FL

Meanwhile, a key category that serves as a proxy for business investment plans edged up 0.7% after declines in April and June. For the first half of the year, this category is down 3.5% from the same period a year ago and has dragged overall economic growth. Manufacturing has been held back this year by a rising dollar and falling oil prices. The higher value of the dollar against foreign currencies makes U.S. goods more expensive and less competitive in major export markets. The lower oil prices have led energy companies to scale back their investment plans.

The government reported last week that the overall economy as measured by the gross domestic product grew at a 2.3% annual rate in the April-June quarter, an improvement from a slight 0.6% GDP increase in the first quarter. The rebound was powered by consumer spending. But business investment contracted at an annual rate of 0.6% in the second quarter, reflecting big declines in equipment spending by various industries and a 68.2% plunge in the category that covers oil and gas exploration and drilling activities.

Economists are hopeful that overall economic growth will revive further to around 3% in the second half of the year as continued gains in employment bolster consumer spending. They expect strength in the consumer sector will be enough to offset weakness in manufacturing. Demand for durable goods, items expected to last at least three years, increased 3.4% in June, matching the estimate made last week in a preliminary report. Orders for nondurable goods such as chemicals, paper and clothing, rose 0.4% after no increase in May.