Despite a slew of recent data showing a softening in the economy, May new orders for U.S.-manufactured goods rose more than expected. This suggests that consumer demand for manufactured goods remains robust despite the Federal Reserve’s aggressive tightening of financial conditions.
On Tuesday, the Commerce Department reported that factory orders increased 1.6% in May, after a 0.7% increase the previous month. Factory orders were expected to increase by 0.5%.
There has been less resilience in other metrics. Although a “overwhelming majority” of businesses reported hiring, the Institute for Supply Management’s national industrial activity index declined for a second consecutive month, according to a poll released on Friday.
Those numbers followed a month of tepid growth in consumer spending and May’s dismal numbers for new home construction, permits to construct, and industrial output.
Strong demand for things is keeping manufacturing, which represents for 12% of the U.S. economy, afloat even as consumer spending shifts away from goods and toward services. The Federal Reserve of the United States is working to reduce excessive inflation by decreasing demand throughout the economy.
Purchases of primary metals, machinery, and transportation equipment all went up in May. Electronics orders also increased by 0.5%. However, demand for electrical machinery and components fell by 1.0%.
From April to May, there was a 1.8% increase in the shipping of manufactured goods. Factory stockpiles rose by 1.3%. There was a little increase in unfulfilled orders in May, up 0.4% from April’s gain of 0.5%.
Orders for non-defense capital goods excluding aircraft, a widely used proxy for businesses’ planned capital expenditures, were up 0.6% in May, the Commerce Department stated, up from the 0.5% gain recorded in April.
Core capital goods shipments, which are used to determine business equipment investment in the gross domestic product report, increased by 0.8% in May, the same rate as April.
The first quarter saw GDP decrease at an annualized pace of 1.5%, while domestic demand was bolstered by strong company expenditure on equipment.