Factory Orders Drop in May

U.S. factory orders declined more than expected in May, with both headline factory orders and durable goods orders down 0.8 percent. Much of the decline was in the volatile transportation sector.

Headline Factory Activity Was Muted

• May’s larger-than-estimated decline of 0.8 percent followed a downwardly revised 0.3 percent dip in April, reiterating the tempered assessment of factory activity from last week’s durable goods report.
• Orders declined on the month for most categories, but the volatile transportation equipment sector stood out as a major driver of May’s decline, dropping 3.0 percent on the month. 

Core Capital Goods Orders and Shipments Rose in May

• Nondefense capital goods orders ex-aircraft, a key benchmark for future business spending, were up 0.2 percent in today’s final report, an improvement from last week’s durable goods report which showed little activity in the pipeline in May.
• Though positive in May, orders and shipments of core capital goods are at their softest 3-month pace of 2017. Recent readings from the ISM suggest activity may ramp up next month.

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