U.S. Markets

U.S. factory orders rise less than expected in June

WASHINGTON, (Reuters) - New orders for U.S.-made goods rose less than expected in June and unfilled orders continued to shrink, pointing to persistent weakness in the manufacturing sector.

Factory goods orders increased 0.6%, boosted by demand for machinery and transportation equipment, the Commerce Department said on Friday. Data for May was revised down to show factory orders falling 1.3% instead of dropping 0.7% as previously reported.

Economists polled by Reuters had forecast factory orders would rise 0.8% in June. Shipments of manufactured goods increased 0.4% in June after edging up 0.1% in May. Unfilled orders at factories dropped 0.7% after declining 0.8% in May. Inventories rose 0.2% after the same gain in May.

Factory orders increased 0.2% compared to June 2018.

The problems in manufacturing and accompanying weak business investment have caught the attention of Federal Reserve officials. The U.S. central bank on Wednesday cut interest rates for the first time since 2008 to insure against downside risks to the economy from trade tensions and slowing global growth.

Fed Chairman Jerome Powell described manufacturing as “not growing much,” saying “we hope to help that with this rate cut.”

Manufacturing, which accounts for more than 12% of the U.S. economy, has been hamstrung by trade tensions, weakening global growth, an inventory bulge - concentrated in the automotive industry - and design problems at aerospace giant Boeing BA.N.

A survey on Monday showed a measure of national factory activity dropped to near a three-year low in July, with manufacturers saying “trade remains a significant issue.”

Transportation equipment orders rebounded 3.7% in June after dropping 7.5% in May. Orders for civilian aircraft and parts soared 75.1% after tumbling 52.0% in May.

The surge in aircraft orders is likely to be short-lived as Boeing has cut production and deliveries of its bestselling MAX 737 aircraft, which was grounded in March after two fatal plane crashes in Indonesia and Ethiopia.

Machinery orders jumped 2.1% after edging up 0.1% in May.

The Commerce Department also said June orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 1.5% instead of the 1.9% surge reported last month.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 0.3% in June instead of 0.6% as previously reported.

Reporting by Lucia Mutikani Editing by Paul Simao