Factory Production in US Rises for Fourth Time in Five Months

US Business-Equipment Orders Increased More Than Forecast in July

Aug. 24, 2018
The data, representing the first results since the U.S. and China imposed tariffs on each other’s goods in early July, signal that business investment remains intact.

Orders placed with U.S. factories for business equipment accelerated by more than forecast in July, a sign solid demand extended into the second half despite corporate concerns over tariffs, Commerce Department figures showed Friday.

Highlights of Durable Goods (July)

  • Non-military capital-goods orders excluding aircraft rose 1.4% (est. 0.5% rise) after upwardly revised 0.6% increase in prior month; figure is proxy for business investment.
  • Shipments of those goods, used to calculate gross domestic product, rose 0.9% (est. 0.3% increase) after upwardly revised 0.9% gain.
  • Broader measure of bookings for all durable goods, or items meant to last at least three years, fell 1.7% (est. 1% decline) following 0.7% increase; reflects plunge in aircraft orders.

Key Takeaways

Orders rose for machinery, computers and electronic products and motor vehicles and parts last month, according to the report. The data, representing the first results since the U.S. and China imposed tariffs on each other’s goods in early July, signal that business investment remains intact even as President Donald Trump widens a trade war to a growing range of products from China.

Growth in business spending, which is getting a boost from lower corporate taxes, is one of the factors supporting economic growth that could reach 3% in the second half. Even so, the uncertainty over trade may spur companies to slow investment. The next round of proposed actions by the Trump administration against Chinese imports would place tariffs of as much as 25% on $200 billion in goods.

The drop in overall durable-goods orders reflects bookings for aircraft and parts, typically a volatile category. Civilian airplane orders fell 35.4% in July, while the military side dropped 34.6%. Boeing Co. previously reported that the planemaker received 30 orders in July, down from 233 in June.

Other Details

  • Excluding transportation equipment, durable-goods orders rose 0.2% (forecast 0.5% rise) after a downwardly revised 0.1% gain.
  • Durable-goods inventories rose 1.3%, biggest increase since May 2011.
  • Orders for machinery rose 0.6% following no change; demand for computers and electronic products jumped 1.1% after a 0.8% gain.
  • Motor vehicle and parts orders rose 3.5% following 4.7% increase.
  • Orders for primary metals rose 0.3%; fabricated-metal product orders unchanged.
  • Defense capital-goods orders fell 8% following 12.9% drop.

By Jeff Kearns

About the Author

Bloomberg

Licensed content from Bloomberg, copyright 2016.

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