Orders to U.S. Factories Increased Less Than Forecast in July
Orders to U.S. Factories Increased Less Than Forecast
Jim R. Bounds/Bloomberg
A report showing manufacturing picked up in August signaled any factory slowdown will not be broad-based assignaled any factory slowdown will not be broad-based as companies like Caterpillar Inc. report increasing demand from overseas.
A report showing manufacturing picked up in August signaled any factory slowdown will not be broad-based assignaled any factory slowdown will not be broad-based as companies like Caterpillar Inc. report increasing demand from overseas. Photographer: Jim R. Bounds/Bloomberg
Orders placed with U.S. factories rose less than forecast in July, restrained by a slump in demand for capital equipment that points to slower business investment in coming months.
The 0.1 percent increase in bookings compared with a 0.2 percent gain projected by the median forecast of economists in a Bloomberg News survey and followed a revised 0.6 percent decline in June, figures from the Commerce Department showed today in Washington. Orders for machinery and computers dropped.
A report yesterday showing manufacturing picked up in August signaled any factory slowdown will not be broad-based as companies like Caterpillar Inc. report increasing demand from overseas while Cisco Systems Inc. and Intel Corp. are among those lowering forecasts. Manufacturing, which accounts for about 11 percent of the world’s largest economy, helped pull the U.S. out of the worst recession since the 1930s.
“Manufacturing is edging back to more moderate, but sustainable, growth,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, who accurately forecasted the gain in orders. “For the recovery to continue, we’re going to need an ongoing recovery in manufacturing.’
Other reports today showed the number of contracts to buy previously owned houses unexpectedly increased in July, while claims for jobless benefits dropped last week.
Housing Outlook
Pending home sales increased 5.2 percent after dropping 2.8 percent in June, according to figures from the National Association of Realtors.
“The recovery looks to be a long process,” Lawrence Yun, the group’s chief economist, said in a statement. “For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”
The number of applications for unemployment insurance payments fell to 472,000 from 478,000 the prior week, figures from the Labor Department showed. The level of claims indicates the labor market remains weak.
Stocks rose after the reports as the outlook for housing turned less dire. The Standard & Poor’s 500 Index rose 0.4 percent to 1,084.27 at 11:15 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 2.62 percent from 2.58 percent late yesterday.
Survey Range
Estimates of total factory orders in the Bloomberg survey ranged from a decline of 1.2 percent to a gain of 2.2 percent, following a previously reported drop of 1.2 percent in June.
Manufacturing expanded in August at the fastest pace in three months, the Institute for Supply Management reported yesterday. The gain reflected increases in production and employment.
Demand for durable goods, which make up just over half of total factory demand, rose 0.4 percent. The government reported on Aug. 25 that bookings for these items increased 0.3 percent in July, boosted by demand for aircraft which is often volatile.
Orders for non-military capital goods excluding aircraft, a proxy for future business investment, dropped 7.2 percent in July, less than the 8 percent decline the government estimated last week. Shipments of such goods, used in calculating gross domestic product, fell 1 percent, also less than the 1.5 percent drop reported last week.
Machinery bookings fell 13.6 percent, the biggest drop since records began in 1992, while demand for computers decreased 18.2 percent.
Cutting Forecasts
Some manufacturers are downgrading their forecasts. Intel, the world’s biggest chipmaker, last week cut its third-quarter revenue projection, citing weaker-than-expected consumer demand for personal computers in mature markets as the reason for the adjustment.
Cisco, the world’s largest maker of networking equipment, in August forecast first-quarter sales that missed analysts’ estimates. Chief Executive Officer John Chambers said the San Jose, California-based company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy.
Bookings of non-durable goods, including food, petroleum and chemicals, were little changed, restrained by a drop in demand for petroleum.
Factory inventories climbed 1 percent in July, the biggest gain since February, today’s report showed. Manufacturers had enough goods on hand to last 1.26 months at the current sales pace, the same as in May and June.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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