Caution Remains Even As Factory Orders Beat Expectations

By John S. McClenahen U.S. factory orders for May fooled the economists. And that, it turns out, is generally good news for manufacturing. New orders for manufactured goods in May increased 0.4% to $320.6 billion, U.S. Commerce Department data show. May's increase was in dramatic contrast to widespread predictions from economists of no change from April and a remarkable turnaround from the 3% decrease in new orders recorded in April. New orders for manufactured non-durables increased 1.2% in May to $152.3 billion. However, new orders for durables, goods that are designed to last three years or longer, fell 0.4% in May to $168.3 billion. And that combination causes David Huether, chief economist at the Washington, D.C.-based National Association of Manufacturers, to be a bit cautious. "This is a continuation of the nearly year-long cycle of up one month and down the next . . . ," he states. Nevertheless, Huether acknowledges some encouraging signs in the latest data. Among them: New orders for industrial machinery were up 16% in May in contrast to sharp declines in February and April, and new orders for computers and electronic products rose 0.7% in May, their third consecutive monthly increase. "Taken together, these are hopeful signs that the all-important investment recovery, which stalled in the first half of the year, is getting back on track," says Huether.

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