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US investment orders edge up 0.4% in June

Published:Friday | August 5, 2016 | 8:00 AM

A key category of orders to United States businesses that tracks investment posted a small gain in June after two months of declines.

But overall factory orders fell, reflecting a drop in the volatile category of commercial aircraft, the Commerce Department reported Thursday.

Orders that cover business investment plans rose 0.4 per cent in June following declines of 0.6 per cent in May and 0.9 per cent in April. Overall orders dropped 1.5 per cent following a 1.2 per cent fall in May. It was the biggest setback for total factory orders since a 1.9 per cent decline in February.

Manufacturing has struggled over the past year as weakness in the global economy and a strong dollar have hurt export sales, and business investment has been crimped by the big drop in energy prices.

The small 0.4 per cent rise in the investment category, which covers nondefence capital goods excluding aircraft, was the first positive gain in this closely watched category since a 0.3 per cent rise in March, and it was the strongest showing since an increase of 2.4 per cent in January.

Business investment has been hurt over the past year by sharp cutbacks by energy companies in the wake of steep declines in oil prices. Orders for mining, oilfield and gas equipment surged 208 per cent in June, but even this big gain left demand in this category down 62 per cent for the first six months of this year, compared to the same period a year ago.

Orders for durable goods, everything from aeroplanes to appliances, fell 3.9 per cent, only slightly changed from an advance report a week ago which estimated durable goods fell four per cent in June. Orders for nondurable goods such as chemicals, paper and food rose one per cent in June following gains of 0.6 per cent in May and 0.4 per cent in April.

Orders for commercial aircraft fell 58.8 per cent in June, while demand for autos and auto parts was up 3.2 per cent. Orders for primary metals were down, reflecting a big drop in orders for iron and steel. Demand for computers fell 9.1 per cent, while orders for household appliances rose 8.4 per cent.

The Institute for Supply Management reported earlier this week that its closely watched gauge of manufacturing activity expanded for a fifth straight month in July, but the reading of 52.6 was down slightly from June's 53.2. Any reading higher than 50 signals growth in manufacturing.

- AP