U.S. May Factory Orders Rise 4.1%; Ex-Trans. Up 4.3%
By Siobhan Hughes
Washington, July 6 (Bloomberg) -- Orders placed with U.S. manufacturers in May
posted the largest gain in almost 7 1/2 years as demand increased for
electronics, transportation equipment and chemicals, government statistics
showed today.
Orders rose 4.1 percent after falling 3.8 percent in April, the Commerce
Department said. Excluding transportation equipment, orders increased 4.3
percent in May, the largest since a similar rise in January 1980.
``No one should underestimate the resiliency of this expansion,'' said Kevin
Flanagan, an economist at Morgan Stanley Dean Witter in New York.
The gain in orders, along with a separate report showing claims for jobless
benefits at the lowest level in five weeks, suggest the economy is still powering
ahead and could fuel further increases in production in coming months.
May shipments of goods from the nation's factories rose 1.9 percent, while
inventories increased 0.2 percent. The inventories- to-shipments ratio fell to a
record-low 1.26 months in May after 1.28 months in April.
``The continued downtrend in the inventory-to-sales ratio argues for a continued
strengthening in production,'' said Greg Jones, chief economist at Briefing.com in
Jackson, Wyoming.
The May increase in total factory orders was the largest since a 4.9 percent
surge in December 1992, Commerce officials said. Analysts were expecting a
3.5 percent gain in overall orders, after a previously 4.3 percent April decrease.
Labor Market
Meantime, the number of Americans filing for first-time jobless benefits fell
12,000 to a level of 296,000 last week, the Labor Department said. Also, the
number of planned job cuts by U.S. businesses fell in June to their lowest total in
36 months as worker shortages continued throughout the U.S., according to a
survey by the employment firm Challenger, Gray and Christmas.
Planned cuts fell 73 percent last month to 17,241 from 63,397 during June 1999.
After the reports, U.S. Treasury securities and stocks fell. The government's
10-year note fell 3/8 points, pushing up the yield 5 basis points to 6.03 percent.
The Dow Jones Industrial Average dropped 87 points, or 0.8 percent, while the
Nasdaq Composite Index declined 31 points, or 0.8 percent, in morning trading.
Manufacturing has increased since 1998, when Asian economies were barely
growing or in recession. ``Recovering foreign demand is partly behind the
strengthened factory sector now, a year and a half past the weakened state tied
to the global downturn,'' said Jones.
Details
Orders for durable goods rose 6.1 percent in May after a 5.8 percent decrease in
April. May orders were initially reported as increasing 6 percent.
The value of orders for non-durable goods, which includes clothing and food as
well as petroleum, chemicals, paper and oil, rose 1.7 percent. The gain in orders
for chemicals and other energy-related materials could be due to rising oil prices.
Crude oil futures for June delivery reached a recent high of $30.33 a barrel on
May 18, compared with $25.74 a barrel at the end of April. That helped boost the
value of orders placed for petroleum.
Unfilled orders rose 1 percent in May after falling 0.5 percent a month earlier.
Orders rose 3.3 percent for transportation equipment such as automobiles, ships
and tanks, the government said.
Boeing Co., the world's largest maker of aircraft, said orders for its planes totaled
57 in May compared with four a month earlier, according to the company's
Internet site.
Excluding military hardware, factory orders rose 4 percent after falling 3.7 percent
in April.
Electronics
Orders were lifted in May by the biggest increase in electronic and electrical
equipment since August 1997, Commerce officials said. Electronic equipment
orders rose 26.4 percent after falling 17.6 percent in April.
Electronic goods include communications equipment, appliances and video
equipment, as well as semiconductors, circuit boards, capacitors, resistors,
coils and transformers.
Micron Technology Inc., Arrow Electronics Inc., and Silicon Storage Technology
Inc. are among chipmakers that have benefited from a boom in the market for
technology equipment.
Micron, the biggest U.S. maker of computer memory chips, doubled sales to
$1.79 billion in the quarter ended June 1 on higher demand from personal
computer makers, the company announced recently.
Melville, New York-based Arrow Electronics Inc., the largest seller of electronic
components and computer products, said profits for the quarter ending June 30
will exceed analysts' forecasts because prices and demand for its products are
rising.
Silicon Storage said June 30 that it expects to report later this month that its
revenue more than quadrupled because of strong sales in networking, wireless
communications and Internet markets.
Other statistics suggest manufacturing is slowing as the Federal Reserve's
interest-rate increases begin to take hold. An industry survey in June showed
manufacturing expanded at the slowest pace in 17 months. The National
Association of Purchasing Management's monthly factory index fell to 51.8 in
June from 53.2 in May.
Consumer Demand
One reason for the slowdown in manufacturing is weaker consumer demand.
Retail sales fell in May for a second straight month as consumers bought fewer
automobiles and other big-ticket goods. In April, sales were down 0.6 percent,
the biggest drop in almost two years. Sluggish sales may have extended into
June.
June sales of North American-built cars and light trucks fell 5.8 percent at
General Motors Corp., 3.1 percent at Ford Motor Co. and 9.8 percent at
DaimlerChrysler AG's Chrysler arm, the companies reported Monday.
While consumer demand has slowed, demand for business equipment remains
strong. Production of computers, semiconductors and other business equipment
increased in May, helping lift total industrial output 0.4 percent during the month,
the Federal Reserve reported earlier this month.
Worldwide sales of semiconductors advanced 36 percent to a record $15.2 billion
in April, boosted by revenue from chips that power cellular phones, according to
the Semiconductor Industry Association in San Jose, California. |
