Wednesday, October 27, 2021
HomeBusinessUS Factory Orders Rise Solidly As Manufacturing Continues To Run

US Factory Orders Rise Solidly As Manufacturing Continues To Run

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WASHINGTON – New orders for U.S.-made products accelerated in August, pointing to sustained strength in manufacturing even as economic growth appeared to have slowed in the third quarter due to shortages of raw materials and labor.

The Commerce Department said on Monday that factory orders rose 1.2% in August. July data was revised up to show that orders increased 0.7% in July instead of gaining 0.4% as previously reported. Economists polled by Reuters had forecast that factory orders would rise 1.0%.

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Orders soared 18.0% year-on-year.

Manufacturing, which accounts for 12% of the economy, is being driven by a still strong demand for goods despite spending being rededicated to services. Companies are recovering inventories, which were depleted in the first half, propping up activity in factories.

A survey by the Institute for Supply Management last week showed that manufacturing activity expanded steadily in September, but noted that “companies and suppliers continue to grapple with an unprecedented number of obstacles to meeting growing demand.”

According to the survey, all industries were “affected by record raw material delivery times, continued shortages of critical materials, rising raw material prices and difficulties in product transportation.”

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Input shortages and the resulting high prices, expressed by the latest wave of COVID-19 infections, driven by the Delta variant, likely caused a sharp slowdown in gross domestic product growth in the third quarter.

Data from last Friday showed that high inflation slashed consumer spending in July, with a moderate rebound in August. The Atlanta Federal Reserve forecasts that GDP growth will slow at an annualized rate of 2.3% in the third quarter. The economy grew at a rate of 6.7% in the second quarter.

The increase in orders for factory goods in August was led by computers and electronics, fabricated metal products, transportation equipment, as well as electrical equipment, appliances, and components. But there were declines in orders for machinery and primary metals.

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The Commerce Department also reported that non-defense capital goods orders excluding aircraft, which are considered a measure of business spending plans on equipment, rose 0.6% in August instead of advancing a 0.5% as reported last month.

Shipments of these so-called basic capital goods, which are used to calculate business equipment spending in the GDP report, increased by 0.8%. It was previously reported that shipments of basic capital goods increased 0.7% in August.

Business spending on equipment was strong in the second quarter, marking the fourth consecutive quarter of double-digit growth. That contributed to raising the level of GDP well above its peak in the fourth quarter of 2019 (Lucia Mutikani report; edited by Andrea Ricci).

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