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Economy in Brief

U.S. Factory Orders Rise More Than Expected in May
by Winnie Tapasanun  July 5, 2022

• New orders +1.6% in May vs. +0.7% in Apr., up for the eighth straight month; Apr. orders revised up.

• Shipments gain 1.8% with rises of 2.3% in nondurable goods and 1.4% in durable goods.

• Inventories rise at a faster pace while unfilled orders increase at a slower pace.

Total factory orders rose 1.6% m/m (14.0% y/y) in May after rises of 0.7% in April (originally +0.3%) and 1.8% in March, according to the U.S. Census Bureau. The May rise registered the eighth consecutive monthly gain and the 12th in 13 months (-0.3% in September). A 0.5% May increase had been expected in the Action Economics Forecast Survey. Factory orders excluding the transportation sector advanced 1.7% (13.5% y/y) after a 0.6% April increase, continuing their string of gains since March 2021's 0.8%.

Durable goods orders grew 0.8% (10.8% y/y) in May after a 0.4% increase in April (+0.7% in the advance report for May), led by monthly orders rises of 3.1% (13.5% y/y) in primary metals, 1.2% (10.6% y/y) in machinery, 1.0% (16.5% y/y) in transportation equipment, 0.9% (1.8% y/y) in furniture & related products, 0.5% (5.8% y/y) in computers & electronic products, and 0.2% (8.4% y/y) in fabricated metal products. Electrical equipment & parts orders, however, fell for the second consecutive month in May, falling 1.0% (+6.4% y/y) following a 0.9% April decline and two straight monthly gains.

Total shipments rose 1.8% (15.0% y/y) in May, the 15th straight m/m rise, after a 0.6% gain in April. Excluding transportation, shipments grew 1.8% (14.8% y/y) after a 0.6% increase. Shipments of durable goods industries rose 1.4% (12.8% y/y), the ninth successive m/m rise, after a 0.3% increase. Shipments gained across all key industry groups, notably by increases of 2.7% (21.1% y/y) in primary metals and 2.1% (16.2% y/y) in transportation equipment, with the exception of a 0.2% decline (+3.3% y/y) in wood products.

Nondurable goods orders, which equal nondurable goods shipments, increased 2.3% (17.3% y/y) in May, the fifth consecutive m/m gain, on top of a 0.9% rise in April. The May increase was led by rises of 8.9% (66.3% y/y) in petroleum & coal products, 2.7% (16.7% y/y) in beverage & tobacco products, 2.0% (5.9% y/y) in textile products, 0.8% (7.5% y/y) in basic chemicals, and 0.7% (9.4% y/y) in leather & allied products. In contrast, nondurable goods shipments for the following items posted m/m drops in May: apparel (-3.7%; +1.7% y/y), plastic & rubber products (-0.3%; +10.0% y/y), textile mills (-0.3%; +3.4% y/y), and food products (-0.2%; +5.0% y/y).

Unfilled orders rose 0.4% (7.3% y/y) in May, the 17th straight m/m rise, after a 0.5% advance in April. Excluding transportation, unfilled orders were up 0.2% (8.0% y/y) after a 0.3% increase. The May rise was led by gains of 0.5% (11.3% y/y) in machinery, 0.5% (6.8% y/y) in transportation equipment, and 0.2% (4.9% y/y) in computer & electronic products but partly offset by a 1.0% decline (+6.0% y/y) in furniture & related products.

Inventories grew 1.3% (11.1% y/y) in May after a 0.8% rise in April, continuing their string of increases since October 2020. Excluding transportation, inventories jumped 1.6% (12.9% y/y), the fastest m/m rise since April 2011, after a 0.8% gain. Inventories of durable goods increased 0.6% (9.9% y/y) and inventories of nondurable goods advanced 2.3% (13.1% y/y).

The factory sector data are available in Haver's USECON database. The Action Economics Forecast Survey is in the AS1REPNA database.

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