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US manufacturers’ orders, inventories and shipments show that manufacturing activity in the country continues to decline, albeit at a slower pace. The US factory orders dropped 1 percent in May after gaining in the earlier two months, according to the Commerce Department.
The May data came in slightly weaker than market projections of 0.8 percent. A drop of 2.3 percent in bookings for durable goods mainly pulled the headline figure down. Defense-related aircraft orders dropped 35.3 percent, standing out in the durable sector. However, other areas also registered weak growth. Durable orders, excluding transportation dropped 0.3 percent in May.
Overall, durable orders have moved up and down from month-to-month; however, they have not shown much of a net change since the end of 2014, noted Daiwa Capital Markets in a research report. In the past year, durable orders, excluding transportation, have drifted lower. Nondefense capital goods orders, other than aircraft, have also moved downwards, deteriorating further by falling 0.4 percent in May.
Meanwhile, nondurable goods’ orders grew 0.3 percent in May. Orders for coal and petroleum products climbed 2.1 percent. The coal and petroleum series accounted for most of the rise in nondurable goods orders.
The change in the petroleum and coal category is expected to have been driven by higher prices. Orders excluding coal and petroleum remain quite the same. Nondurable orders excluding petroleum and coal indicated a hint of revival last month; however, a 0.2 percent downward revision dampened the rebound, added Daiwa Capital Markets.
The trend seen in nondurable orders excluding coal and petroleum is flat. Given that new orders are showing slight change, unfilled orders were also weak, growing 0.2 percent. But backlogs increased 0.6 percent. Meanwhile, inventories at the manufacturing level declined 0.1 percent, continuing with the downtrend that started at the end of 2014. However, the pace of drop is decelerating.
