Strong factory orders, auto sales brighten U.S. economic picture

WASHINGTON Wed Sep 3, 2014 4:58pm EDT

Vehicles are covered with protective wrap as workers prepare the General Motors automakers display ahead of the media preview of the North American International Auto Show at Cobo Center in Detroit, Michigan January 11, 2014.  REUTERS/Rebecca Cook

Vehicles are covered with protective wrap as workers prepare the General Motors automakers display ahead of the media preview of the North American International Auto Show at Cobo Center in Detroit, Michigan January 11, 2014.

Credit: Reuters/Rebecca Cook

WASHINGTON (Reuters) - New orders for U.S. factory goods posted a record gain in July and auto sales last month accelerated to their highest level in 8-1/2 years, offering further bullish signals for the economy.

Another report on Wednesday from the Federal Reserve showed manufacturing expanding across a broad base of sectors and auto sales hitting "high levels" in recent weeks.

"U.S. economic activity continues to improve," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

The Commerce Department said new orders for manufactured goods jumped 10.5 percent in July on robust demand for aircraft and autos, compared to a 1.5 percent rise in June.

Orders excluding the volatile transportation category slipped 0.8 percent in July, but that drop followed a 1.4 percent increase the prior month, leaving intact the upbeat trend for manufacturing activity.

Separately, industry research firm Autodata Corp said auto sales rose to a seasonally adjusted annual rate of 17.53 million units in August, the highest level since January 2006 and above Wall Street's expectations of a 16.6 million-unit pace.

Ford Motor Co (F.N) saw a 0.4 percent increase in sales, while Chrysler Group - a unit of Fiat SpA (FIA.MI) - reported a 20 percent surge. General Motors Co (GM.N), however, said its sales declined 1.2 percent.

Manufacturing is accelerating, with the Institute for Supply Management reporting on Tuesday that its gauge of factory activity hit its highest level in nearly 3-1/2 years in August. In addition, a measure of new orders touched a 10-year high.

The factory and auto sales reports added to employment and housing data in painting an upbeat picture of the economy.

BUSINESS SPENDING RISING

Economists say the acceleration in factory activity suggested a pickup in business spending on capital goods and supported their forecasts for sturdy growth in the third quarter.

Growth estimates for the July-September period range as high as a 3.5 percent annual pace. The economy expanded at a 4.2 percent rate in the second quarter.

Separately, the Fed's Beige Book found economic activity continued to expand in recent weeks. It said manufacturing was growing broadly, with auto production boosting demand for steel and other related products.

"It reinforces the current narrative of improving domestic economic fundamentals," said Millan Mulraine, deputy chief economist at TD Securities in New York.

U.S. financial markets were largely unmoved by the data as investors focused on the conflict in eastern Ukraine. U.S. stocks ended mixed, with Apple (AAPL.O) shares falling 4.22 percent as it grappled with a possible security breach of its iCloud service a week before the launch of its new iPhone.

Orders for transportation equipment soared a record 74.1 percent in July, reflecting outsized civilian aircraft orders received by Boeing (BA.N) that was flagged in the durable goods orders report published last week.

Auto orders rose 7.3 percent, the largest increase since March 2011, and capital goods orders surged a record 52.5 percent. But orders for primary metals, machinery, computers and electrical equipment, appliances and components fell.

Unfilled orders at factories recorded their largest rise in 14 years, while inventories remained lean, both positive signs for the sector in the near term.

(Reporting by Lucia Mutikani; Additional reporting by Bernie Woodall and Ben Klayman in Detroit and Michael Flaherty in Washington; Editing by Paul Simao)

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Comments (9)
beofaction wrote:
I’m glad manufacturing seems to be doing well. Interesting that now with Obama in office Reuters gives the impression that this good news translates to the whole of our economy. After the 2001 recession when manufacturing rebounded the message was decidedly less positive. Reuters and the rest of the media constantly pointed out that manufacturing “only accounts for about 14% of GDP…”. Well guess what? It’s still about the same percentage of GDP!

Sep 03, 2014 12:08pm EDT  --  Report as abuse
lateralgs wrote:
beo, I guess people will read what they want. I don’t see anything in this article that goes beyond manufacturing data and capital investment by businesses, except for a single statement regarding the data seeming to reinforce economists’ forecasts for “sturdy growth in the third quarter.” I think the report is fact based, and the reader is largely left to their own conclusions. You apparently have drawn yours.

Sep 03, 2014 12:51pm EDT  --  Report as abuse
BeRealistic wrote:
beofaction, that is likely because GW did not pay his protection money.

Sep 03, 2014 12:55pm EDT  --  Report as abuse
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