© Reuters. FILE PHOTO: Autonomous robots assemble a Model X SUV at BMW’s manufacturing facility in Greer, South Carolina, USA, November 4, 2019. REUTERS / Charles Mostoller
WASHINGTON (Reuters) – New orders for U.S.-made products rose more than expected in June, while business spending on equipment was strong, pointing to sustained strength in manufacturing even as spending is shifting from goods to services.
The Commerce Department said on Tuesday that factory orders rose 1.5% in June after advancing 2.3% in May. Economists polled by Reuters had forecast that factory orders rose 1.0%.
Orders soared 18.4% year-on-year. Demand shifted to goods during the COVID-19 pandemic when millions of Americans were locked up at home, boosting manufacturing, which accounts for 11.9% of the US economy. But rising demand is testing the supply chain.
The Institute for Supply Management reported on Monday that manufacturing activity grew at a slower pace in July for the second month in a row as raw material shortages persisted. However, the survey suggested that supply chain bottlenecks were beginning to ease.
Spending is returning to services, as nearly half the population has been fully vaccinated against COVID-19, allowing people to travel, frequent restaurants, visit casinos, and attend sporting events among activities related to the services that were stopped at the beginning of the pandemic.
The increase in factory goods orders in June was broad, with notable gains in machinery, computers and electronics, as well as equipment, appliances and electrical components. Transportation equipment orders increased 2.0%.
The Commerce Department also reported that non-defense capital goods orders excluding aircraft, which are seen as a measure of business spending plans on equipment, rose a solid 0.7% in June instead of 0. , 5% as reported last month.
Shipments of basic capital goods, which are used to calculate business equipment spending in the gross domestic product report, advanced 0.6% as estimated last month.
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.
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