Factory Orders Continue To Climb

A man moves a roll of steel inside a factory in St. Louis. i i

Derek Jenkins, an employee at Baldor Electric Co., moves a large roll of steel inside the company's St. Louis factory in June. Factory orders rose in July for the fifth time in six months — an unexpected gain and the latest sign of recovery in the ailing manufacturing sector. Jeff Roberson/AP hide caption

itoggle caption Jeff Roberson/AP
A man moves a roll of steel inside a factory in St. Louis.

Derek Jenkins, an employee at Baldor Electric Co., moves a large roll of steel inside the company's St. Louis factory in June. Factory orders rose in July for the fifth time in six months — an unexpected gain and the latest sign of recovery in the ailing manufacturing sector.

Jeff Roberson/AP

Orders to U.S. factories rose 1.3 percent in July, as the sluggish demand for nondurable goods undercut a rise in orders for aircraft and other transportation products, according to a government report released Wednesday.

There was also some moderately upbeat news on the job front, with employers cutting 62,000 fewer private-sector jobs in August than in July.

The Commerce Department said factory orders rose for the fifth time in the past six months, but not enough to meet analysts' expectations of a 2.2 percent increase. Factory orders were up 0.9 percent in June.

The volatile transportation goods category showed an increase of 18.5 percent last month after suffering a steep, 30 percent decline in June, according to the report.

But nondurable goods saw an overall drop in demand. Orders for food, textiles, paper goods, petroleum products, chemicals and other nondurable products fell 1.9 percent. It was the largest dip since December.

Meanwhile, other data also suggested that a moderate recovery may be under way, with some improvement in employment. The ADP Employer Services report showed that the U.S. lost fewer private-sector jobs in August than in the month before.

According to ADP, employers cut 298,000 private-sector jobs, following a revised loss of 360,000 jobs in July. Despite being the smallest drop since September 2008, ADP said employers are likely to continue cutting job for several more months.

David Wyss, chief economist at Standard & Poor's, said that while the payroll figures were disappointing, the ADP report hasn't been tracking the Labor Department figures.

He's looking for more pain in the Labor Department's unemployment report, which is due out Friday.

"We're looking for a 225,000 drop and a rise in the unemployment [of] 9.6 percent," he said.

Many economists expect the jobless rate for August to rise to 9.5 percent from July's 9.4 percent.

Although he predicted some job gains in the fourth quarter, Wyss said he believes the unemployment rate will hit 10 percent by year's end and 10.3 percent by spring, after which jobs should be on the upswing.

Wyss said merchants are likely to experience weak back-to-school sales, followed by a very soft Christmas. If that prediction holds true, he said, it would be the first time U.S. merchants have seen disappointing holiday sales two years in a row.

Wednesday's data came on the heels of Tuesday's good news from the Institute for Supply Management. The highly regarded report on U.S. factory activity inched upward from 48.9 in July to 52.9 in August.

Readings above 50 indicate growth in factory activity. Carmakers reaped big rewards last month because of the government's Cash for Clunkers program, which pushed orders and production upward.

Material from The Associated Press was used in this report.

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