Boosts From Boeing Still Couldn’t Keep US Factory Sector Out of Q3 Slump

The data is in and it looks like US made goods orders in US factories have fallen, a surprise after quite a flourishing month in the factory sector, led by Boeing aircraft sales and production. Indeed, orders in July fell by 3.3 percent after having been revised, upwardly, from a 3.2 percent gain from the previous month. According to the United States Department of Commerce, this is the biggest drop in almost three years but thee may be an upside: capital goods are still somewhat stronger than originally reported.

This, they say, could indicate faster business spending for the past quarter.

Now, it is important to note that this drop, in July, was widely expected by economists. After all, manufacturing makes up roughly 12 percent of the entire United States economy, and this is getting stronger even at a time when motor vehicle production has taken a cut (down about 1 percent after holding steady in June).

Also, the USD was trading lower against several currencies, even as US Treasuries prices rose slightly. The most recent report also showed that orders for non-defense capital goods (excluding aircraft) improved by a single percent, which is more than double the predicted growth. This metric is important, of course, as it is a solid measure of business spending plans in the US.

Indeed, analysts argue that the surge in shipments could be an indication that business spending on equipment extended through the third quarter. Data shows, in fact, that business investment on equipment jumped nearly 9 percent between April and June, and that is the fastest pace since quarter in 2015.
Following this, then, orders for computers and electronic products increased 2.1 percent in July. That is an impressive gain for this year, also supported by 2.6 percent gains in electrical equipment orders and appliance and components orders.

On the other hand, machinery orders are down nearly 1 percent, the largest such drop in nine months, after a 0.5 percent gain in June. Similarly, industrial machinery orders fell 0.8 percent.

But it was orders in transportation equipment that fell the most—more than 19 percent—the biggest differential since August 2014, and reflecting a 70.8 percent fall in civilian aircraft orders.

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