BLBG: Orders to U.S. Factories Increased Less Than Forecast in July
By Timothy R. Homan
Sept. 2 (Bloomberg) -- Orders placed with U.S. factories rose less than forecast in July, restrained by a slump in demand for capital equipment that points to a slowdown in business investment in coming months.
The 0.1 percent increase in bookings compared with a 0.2 percent gain projected by the median forecast of economists in a Bloomberg News survey and followed a revised 0.6 percent decline in June, figures from the Commerce Department showed today in Washington. Orders for machinery and computers dropped.
A report yesterday showing manufacturing picked up in August signaled any factory slowdown will not be broad-based as companies like Caterpillar Inc. report increasing demand from overseas while Cisco Systems Inc. and Intel Corp. are among those lowering forecasts. Manufacturing, which accounts for about 11 percent of the world’s largest economy, helped pull the U.S. out of the worst recession since the 1930s.
“We’re through the initial phase where manufacturing saw a surge,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. “Manufacturing lost a lot of momentum, but we’ll see some growth in the months ahead.”
Other reports today showed the number of contracts to buy previously owned houses unexpectedly increased in July, while claims for jobless benefits dropped last week.
Pending home sales increased 5.2 percent after dropping 2.8 percent in June, according to figures from the National Association of Realtors.
Housing Outlook
“The recovery looks to be a long process,” Lawrence Yun, the group’s chief economist, said in a statement. “For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.”
The number of applications for unemployment insurance payments fell to 472,000 from 478,000 the prior week, figures from the Labor Department showed. The level of claims indicates the labor market remains weak.
Estimates of total factory orders in the Bloomberg survey ranged from a decline of 1.2 percent to a gain of 2.2 percent, following a previously reported drop of 1.2 percent in June.
Manufacturing expanded in August at the fastest pace in three months, the Institute for Supply Management reported yesterday. The gain reflected increases in production and employment.
Durable Goods
Demand for durable goods, which make up just over half of total factory demand, rose 0.4 percent. The government reported on Aug. 25 that bookings for these items increased 0.3 percent in July, boosted by demand for aircraft which is often volatile.
Some manufacturers are downgrading their forecasts. Intel, the world’s biggest chipmaker, last week cut its third-quarter revenue projection, citing weaker-than-expected consumer demand for personal computers in mature markets as the reason for the adjustment.
Cisco, the world’s largest maker of networking equipment, in August forecast first-quarter sales that missed analysts’ estimates. Chief Executive Officer John Chambers said the San Jose, California-based company was seeing “unusual uncertainty” and getting “mixed signals” about the health of the economy.
Bookings of non-durable goods, including food, petroleum and chemicals, were little changed, restrained by a drop in demand for petroleum.
Factory inventories climbed 1 percent in July, the biggest gain since February, today’s report showed. Manufacturers had enough goods on hand to last 1.26 months at the current sales pace, the same as in May and June.
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
