USA Orders Up

Factory orders up in May, driven by aircraft demand

Updated 2h 7m ago |

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WASHINGTON (AP) — U.S. businesses ordered more airplanes, autos, and oil drilling equipment in May, suggesting supply disruptions stemming from the Japan crisis are fading.

  • In this July 1, 2011 photo, John Rosas, an employee with the metal works factory Wizard of Metals, cuts steel in San Francisco.Paul Sakuma, AP

    In this July 1, 2011 photo, John Rosas, an employee with the metal works factory Wizard of Metals, cuts steel in San Francisco.

Paul Sakuma, AP

In this July 1, 2011 photo, John Rosas, an employee with the metal works factory Wizard of Metals, cuts steel in San Francisco.

The Commerce Department said Tuesday that factory orders rose 0.8% in May. That followed a downwardly revised drop of 0.9% in April.

Much of the increase was driven by orders for aircraft, a volatile category, which jumped 36.5%. Auto and auto parts orders rose 2%. Excluding transportation, factory orders increased 0.2% in May, the same as April and down from a 2.9% gain in March.

The report also showed that U.S. companies, flush with cash, were investing in computers and other equipment. A measure of business investment rose 1.6%, after falling 0.4% the previous month.

Orders for so-called non-durable goods, such as food, clothing, oil, and plastics, fell 0.2% in May. That’s partly because oil prices fell in May.

The manufacturing sector has been one of the strongest areas of the economy since the recession ended two years ago. But factory output slowed this spring.

Economists have largely blamed the sluggish stretch on high gas prices and the impact of the March 11th earthquake in Japan, which led to a parts shortage that has hampered U.S. manufacturers.

Those factors appear to be easing. Gas prices have come down since peaking in early May. And the manufacturing sector expanded at a faster pace in June after slowing sharply in May, according to the Institute of Supply Management.

A recovery in the auto sector is one reason production is picking up. Japanese automakers with plants in the United States, such as Toyota MotorHonda Motor and Nissan Motor, sharply cut production in the spring. But they are restoring output. Toyota executives say their North American factories will be back to 100% by September.

Reports from the major automakers last week showed that sales rose 7% in June, compared to a year ago.

Busier auto plants would help boost the economy in the second half of this year. The economy grew at a 1.9% annual pace in the January-March quarter. Most economists expect a similarly weak pace of growth in the April-June quarter.

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