Manufacturing Recovery, While Still on Track, is Clearly Slowing

July 28, 2010
Orders decreased 1%, the second consecutive monthly decrease.

New orders for manufactured durable goods in June decreased $2 billion or 1% to $190.5 billion, the U.S. Census Bureau announced on July 28.

This was the second consecutive monthly decrease and followed a 0.8% May decrease.

Excluding transportation, new orders decreased 0.6%. Excluding defense, new orders decreased 0.7%.

Transportation equipment, down four of the last five months, had the largest decrease, $1.1 billion or 2.4% to $45.9 billion. This was due to nondefense aircraft and parts, which decreased $1.8 billion.

"Amidst a sluggish and increasingly uncertain economic recovery, the June report on demand for long-lasting consumer and capital goods shows that the manufacturing recovery, while still on track, is clearly slowing," said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI. "Year-to-date total orders excluding transportation were up more than 15% but the data from pivotal sectors of the manufacturing supply chain suggest that the underpinnings of the strong factory sector recovery are clearly weakening. Primary metals demand fell by 2%, the second consecutive monthly decline, while machinery demand declined by 0.7%, the second drop in the past three months.

"On a brighter note, the modest increase in new orders for non-defense capital goods excluding volatile aircraft demand shows that business equipment investment remains positive," he added. "Capital spending is an essential ingredient for keeping the shaky U.S. economic recovery alive, given a troubled household sector that is confronting high unemployment, a continued need to deleverage amidst weaker housing and financial wealth, and tighter credit conditions. If consumer demand becomes depressed enough to stall total U.S. economic growth, the manufacturing recovery will slow even more than recent data suggest."

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