Orders to U.S. Factories Decreased Less Than Forecast in July

Orders placed with U.S. factories fell less than forecast in July as rising fuel prices propelled the biggest gain in non-durable goods in a year.

The 2.4 percent decrease in bookings followed a revised 1.6 percent gain in the prior month, a Commerce Department report showed today in Washington. The median forecast of 62 economists in a Bloomberg survey called for a decline of 3.4 percent. Demand for non-durable goods climbed 2.4 percent, the most since July 2012, as petroleum sales shot up 7.3 percent.

The report also showed that orders for capital equipment dropped more than estimated in last week’s durable goods report, a sign business investment was off to a slow start in the third quarter. At the same time, data this week showing the Institute for Supply Management’s manufacturing index jumped to the highest level in more than two years indicate the housing rebound and surging demand for automobiles are sustaining factory activity.

“It’s an uneven recovery in manufacturing,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “The sector will keep expanding but there are some near-term concerns.”

Estimates in the Bloomberg survey ranged from declines of 0.5 percent to 5 percent. The Commerce Department revised the June figure from a previously reported gain of 1.5 percent.

Other reports today showed applications for unemployment benefits dropped more than forecast last week, companies kept boosting payrolls last month and worker productivity climbed more than projected in the second quarter.

Fewer Claims

Jobless claims declined by 9,000 to 323,000 in the week ended Aug. 31, less than the lowest estimate of economists surveyed by Bloomberg, from a revised 332,000, according to Labor Department data.

Companies boosted employment by 176,000 workers in August, figures from the Roseland, New Jersey-based ADP Research Institute also showed today. The median forecast of 43 economists surveyed by Bloomberg called for a 184,000 gain. Estimates ranged from increases of 150,000 to 225,000.

The measure of employee output per hour increased at a 2.3 percent annualized rate from April through June after a 1.7 percent decline in the prior three months, another Labor Department report showed. The gain in worker productivity exceeded the median forecast in a Bloomberg survey of economists that called for a 1.6 percent advance. The increase in efficiency last quarter was initially reported as 0.9 percent.

The Commerce Department’s factory orders report showed bookings excluding transportation equipment rose 1.2 percent, the most since January, after a 0.3 percent decrease the prior month.

Durable Goods

Bookings for durable goods, those meant to last at least three years, declined 7.4 percent. They make up just over half of total factory demand. Today’s reading compared with the drop of 7.3 percent estimated by the government on Aug. 26.

Boeing Co., the Chicago-based aerospace company, had said it received orders for 90 aircraft in July, down from 287 the previous month.

Demand for non-durable goods, including petroleum, is often influenced by changes in prices as the data are not adjusted for inflation.

Orders for non-defense capital goods excluding aircraft, a measure of future business investment, fell 4 percent after increasing 1.1 percent the prior month. The figure was revised down from the government’s estimate of a 3.3 percent decline issued last week.

Growth Impact

Shipments of those goods, used in calculating gross domestic product, decreased 1.7 percent, also more than previously estimated, after a drop of 1 percent the previous month.

Factory inventories climbed 0.2 percent in July, today’s report showed. Manufacturers had enough goods on hand to last 1.29 months at the current sales pace, down from 1.3 in June.

Manufacturing, which accounts for about 12 percent of the economy, is likely to keep contributing to growth this year. The ISM’s factory index rose to 55.7 in August, the highest level since June 2011, from 55.4 a month earlier, the Tempe, Arizona-based group reported on Sept. 3.

Before it's here, it's on the Bloomberg Terminal.