New orders for U.S. factory goods fell in May on weak demand for transportation and defense capital goods, but growing order backlogs and lean inventories suggested the worst of the manufacturing downturn was probably over, Reuters reports.
The Commerce Department announced this morning that new orders for manufactured goods declined 1% after two straight months of increases. May’s drop was in line with economists’ expectations and followed a 1.8% increase in April.
Manufacturing, which accounts for about 12% of the economy, has been squeezed by a strong dollar and weak global demand, which have undercut exports of factory goods, as well as efforts by businesses to reduce an inventory bloat.
The sector has also been hurt by spending cuts by energy firms as they adjust to reduced profits from cheaper oil.
There are, however, signs the sector could be close to turning the corner. The Institute for Supply Management released a survey Friday showing national activity surged in June, with factories reporting strong increases in new orders, including exports, order backlogs and inventories.
The survey also shows while most procurement executives do not foresee major disruptions, many were cautiously watching the situation closely and believed the so-called Brexit would hamper growth.
In May, orders for transportation equipment fell 5.7%, despite a 0.8% increase in demand for motor vehicles and parts. Defense capital goods orders tumbled 28.1%.
