Factory Orders in the US Up Nearly 2 Percent

With many areas of the US labor sector struggling, some good news is in order, yes? Well, the latest data says that orders to US factories moved up in July by the largest amount in the last nine months. This was set off, perhaps, by a massive demand for commercial aircraft, a key category for tracking business investment posting its biggest increase since the first of the year.

More specifically, overall factory orders rose 1.9 percent in July, according to a report from the Commerce Department. This was also the biggest single-month gain since nearly a year ago, led by a surge in that highly volatile commercial aircraft category.

Of course, on the heels of this improvement, economists are now hoping to see more steady and solid growth after such a period of weakness. They want business investment to rebound through the second half of this year. With support for this view, demand for equipment in oil rose for the third month.

Indeed, the constantly shifting oil field and mining machinery category jumped an impressive 45.6 percent in July. Unfortunately, even three months of steady gains could not help save the total orders in this category from remaining under 60 percent of its rate over the last 7 months when compared to last year. Similarly, the energy sector had dramatically reduced its drilling and exploration efforts as a results of the massive drop in oil prices, with this sector only now starting to find some footing.

Fortunately, there is yet more good news: durable goods orders—from airplanes to appliances—rose 4.4 percent during the same month, which correlates with the same estimates made by the government in an early report. Still, orders for non-durable goods (including chemicals and paper) fell by about one-half percent in July after increasing 0.8 percent in the prior month.

Economists now generally believe that the manufacturing sector is showing signs of stabilizing but a recent report released by the Institute for Supply Management indicates that this closely monitored measure of manufacturing activity will expose a contraction in manufacturing last month. This is the first evidence of this since February as new orders and present output continue to fall through August, also resulting in job cutting at factories.

However, economists argue that this is only a temporary setback.

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