May U.S. factory orders rise 0.6%, in-line with estimate

Posted Jul 2nd 2008 11:50AM by Joseph Lazzaro
Filed under: Forecasts, Industry, Economic Data, Recession

Factory orders increased 0.6% in May, the U.S. Commerce Department announced Wednesday, on rising demand for computers and defense equipment. It was the third consecutive monthly rise in factory orders, the Commerce Department said. Excluding the often-volatile transportation component, factory orders increased 0.4%.

Economists surveyed by Bloomberg News had expected May factory orders to increase by 0.6%. Factory orders increased a revised 1.3% in April.

Economists follow the factory orders statistic because it provides one of the most comprehensive surveys of advance orders for durable goods -- how busy factories are likely to be in the period ahead. Factory orders also are a major value-added component of the U.S. economy.

In May, new orders rose 1.2%, bookings increased 0.6%, shipments rose 0.1%, and unfilled orders increased 0.1%. Also, the inventories-to-shipments ratio was virtually unchanged in May at 1.23, compared to 1.22 in April.

U.S.'s saving grace (so far): exports

Economist Peter Dawson told BloggingStocks Wednesday that although factory orders registered a third straight monthly gain, economic growth and overall business conditions are not something to write home about. "Overall factory conditions are weak, but again, the one saving grace for the United States is exports. Without export activity, the factory situation would be very poor," Dawson said. "So far, international demand has prevented the U.S. economy from falling into a deep recession, given poor demand on the domestic side from businesses and consumers."

Further, Dawson said that although the May factory orders data "confirms that the economy has not run off the road completely," domestic headwinds still point to negative GDP for Q2 and Q3, in his interpretation. "My sense is that the past quarter's corporate investment cutbacks will add to housing's doldrums and turn GDP negative in Q2, probably in the negative 0.3-0.6% range," Dawson said. "More than likely, Q3 GDP will be negative too, by a slightly lower amount, 0.2-0.5%."

Tags: factory orders, gdp, inthenews, inventories, U.S. Commerce Department, U.S. economy