Factory Orders Rise 2.1%, Regaining April Loss
Orders to factories for manufactured goods in May regained their 2.1% loss of a month earlier, the government reported Tuesday, and analysts said industry may be starting to recover from its slump.
“The manufacturing sector seems to have gone through the worst and has a slight upward tilt,” said Robert G. Dederick, chief economist with Northern Trust Co. of Chicago. “But the real question is whether it’s a false dawn and whether it will fade again.”
The Commerce Department said orders for durable and non-durable goods rebounded 2.1% to a seasonally adjusted $240.9 billion.
The size of the May increase had been expected by many analysts. At the same time, the size of the April decline was a slight improvement from the 2.3% drop first reported.
It was the third gain in orders since they dropped 5.5% in January and their steepest decline since a 7% decrease in December, 1974. All categories advanced in May except non-durable orders, which were unchanged at $112.4 billion after inching up 0.2% in April.
But analysts expressed concern over the strength of any manufacturing turnaround, saying much of it is coming from U.S. exports while demand from American consumers has weakened recently.
Exports represented just 14.2% of the 1989 gross national product--the nation’s total output of goods and services--while personal consumption contributed 64.2%.
“Another weakness that has really been making the industrial sector go sideways is capital spending,” said Priscilla Trumbull, an economist with the WEFA Group in Bala-Cynwyd, Pa. “But we seem to be seeing a little bit of improvement there.”
Non-defense capital spending excluding aircraft edged up 0.1% in May after back-to-back 1.1% declines in the preceding two months. This category is often viewed as a barometer of investment plans.
“If this is part of a turnaround, it’s still pretty much in the embryonic stage,” said Gordon Richards, director of economic policy at the National Assn. of Manufacturers.
Orders for durable goods--big-ticket items expected to last at least three years--jumped 4% to $128.6 billion, nearly recovering the 4.1% decline in April.
The often-volatile defense orders also rose, up 19.2% to $10 billion after gains of 4.8% and 4.5%. Excluding the defense category, orders were up 1.5%.
Transportation equipment orders jumped by 10.1% in May after a 13.2% fall in April. Within that category, orders for aircraft and parts increased by 12.1% in May after a decline of 27.7% in April.
Shipments of motor vehicles and parts were up in May by 12.3% after a 6.1% April drop.
The department said motor vehicles accounted for about half of the overall gain in May factory orders. Although new-car sales have been weak, manufacturers are expected to build up stocks to have products for sale in the event of work stoppages by union employees.
FACTORY ORDERS
Total new oerders in billions of dollars, seasonally adjusted:
May,’90: 241.0
Apr.,’90: 236.0
May,’89: 233.8
Source: Commerce Department
