U.S. factory orders fall more than expectations in May

U.S. factory orders dropped more than expectations in May, following a downward revision to May’s print. Total orders in the manufacturing sector fell 0.8 percent in May, as compared with the consensus expectations of a drop of 0.5 percent. Both durable and nondurable components contributed equally, with each falling 0.8 percent in the month. The April print to revised down to a drop of 0.3 percent from the earlier reading of a drop of 0.2 percent.

The fall of 0.8 percent in durable goods was upwardly revised from the preliminary estimate of a drop of 1.1 percent, with several industries adding to the adjustment. Most of the decline in durable bookings was due to a decline in the volatile aircraft category, with both defense and commercial aircraft orders declining.

Stripping transportation, durable orders were up 0.3 percent. This rise just partly countered a decline of 0.4 percent in the earlier month; however, gains in the late 2016 and in the first quarter were strong, and therefore, the small moves in the past two months did just minor damage to what seems to be a developing upward trend.

Orders for nondefense capital goods other than aircraft added to the upward revision in May, signalling an upward drift to this series in the past few months rather than a flat performance. The fall of 3.2 percent in orders for petroleum and coal products resulted in the retreat in the nondurable area, and most of this shift was likely due to lower prices, noted Daiwa Capital Markets. Orders excluding petroleum and coal dropped 0.2 percent; however, such bookings had risen in the earlier three months and in five of the prior six. The modes drop in May had a minor impact on the upward tilt in this series.

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