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US Factory Orders Miss Forecast, Auto Sales Accelerate

 

New orders for American made manufactured goods  fell  as defense procurement and demand for transportation equipment declined hinting that the first quarter's economic weakness may have continued into the Spring.

Placements at U.S factories dropped 0.4 percent in April after rising 2.2 percent in March. Economists had predicted a 0.1 percent loss. Factory order have declined in eight of the last nine months and have not seen back to back gains since last June and July.

Excluding orders in the transportation sectors, which includes Boeing Company of Chicago, the largest U.S. exporter, orders were flat in April, the second month in a row. Orders were also unchanged when Federal government defense spending was removed. These orders were up 1.4 percent in March.

Transportation orders fell 2.4 percent in April as did interest in consumer goods, computers and information technology.

Over the past year new orders have fallen in all three categories of factory production. Overall factory orders were down 6.4 percent, the sixth decline in a row. Orders excluding transportation were off 6.3 percent, the fifth straight decrease and orders without defense spending were 4.8 percent lower, their sixth loss in a row. 

Despite the general weakness in the factory sector, automobile sales in May were the strongest in almost a decade.

Consumers bought 17.71 million cars and light trucks in May and 13.95 million of those were domestically produced. 

The average age of the U. S. light vehicle fleet has been steadily rising for more than ten years, though it took a sharp jump after the financial crisis. It was 11.4 years in 2014, the same as the year before and that is a record for data that goes back 20 years.

Strong auto sales could potentially boost economic growth. A rebound in personal spending which was flat in April and accounts for about 70 percent of U.S. economic activity, would help lift economic activity after it turned negative in the first three months.

But an increase in consumption is probably dependent on improvement in salaries and wages, which have been largely stagnant for the past five years. 

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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