Factory orders fall in June larger than forecast

 Factory orders fell 1.2% in June, a larger decline than forecasts. Durable goods orders were downwardly revised to -1.2% from -1.0%, while nondurable goods orders fell 1.3%.

 Nondefense capital goods orders excluding aircraft rose 0.2% in June (up 25.0% at an annual rate in the second quarter), while shipments of these capital goods increased 0.5% in the month (up 16.7% at an annual rate in the second quarter).

BOTTOM LINE: The factory orders data suggest that the manufacturing sector has lost some of its growth momentum as durable goods order growth slowed sharply during the second quarter, while total factory orders have declined. One must be a little careful interpreting the factory orders data for nondurable goods since all the data in this report are presented in current (rather than real) dollars and petroleum price movements can be a major influence on the data. Energy prices fell sharply in the second quarter, which would depress the value of shipments and orders of nondurable goods (indeed 80% of the decline in nondurable orders since March was the result of lower orders/shipments of petroleum and coal products). More encouraging, however, is the strength of capital goods orders and shipments and this report does nothing to change the picture that this sector is gaining momentum with order growth ahead of shipments, resulting in rising backlogs of orders for capital equipment.


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