Strong Factory Orders Number Confirms ISM Rebound

US Factory Orders (MAY)

Actual: 0.6%
Expected: 0.5%
Previous: 1.3% (R+)

Manufacturers continue to struggle with record energy prices, high lending costs and a cooling in the domestic economy; but the sector may still be a positive contributor to growth through the second quarter. Following Tuesday's release of the ISM manufacturing activity survey for the month of June (notably marking the first expansionary reading in five months), the bookings at American factories rose 0.6 percent through May. This was better than expected, the third consecutive improvement and accompanied by a positive revision to the previous month's reading. Looking into the details of the report, businesses spending accounted for most of the improvement with demand for capital goods rose 1.9 percent - following a similarly sized contraction in the previous reading. At the same time, the durabable goods orders were actually unchanged over the period - though transportation and electronic bookings actually rose 2.5 and 2.9 percent respectively. A reading on current activity was struggling with a modest 0.1 percent increase - more closely reflecting the decline in consumption and therefore orders in the US and even the struggle to find a fill in from demand from abroad.

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