New orders for U.S.-made goods increased solidly in September, but further gains could be limited amid an anticipated slowdown in consumer spending as government money for businesses and workers impacted by the COVID-19 pandemic runs out.
The Commerce Department said on Tuesday that factory orders rose 1.1 per cent after climbing 0.6 per cent in August. Orders were boosted by increased demand for primary metals, computers and electronic products as well as motor vehicles and fabricated metal products. But orders for machinery, furniture and electrical equipment, appliances and components fell.
Economists polled by Reuters had forecast factory orders would rise 1.0 per cent in September.
Manufacturing, which accounts for 11.3 per cent of U.S. economic activity, has been boosted by a shift in spending from services toward goods as Americans set up home offices and remote classrooms and avoid public transportation because of the coronavirus.
A survey on Monday from the Institute for Supply Management on Monday showed its measure of national factory activity raced to its highest level in nearly two years in October, with new orders surging to their highest level in almost 17 years.
But the strong manufacturing sentiment likely overstates the health of the sector. A report from the Federal Reserve last month showed production at factories dropped 0.3 per cent in September and remained 6.4 per cent below its pre-pandemic level.
Stocks on Wall Street were trading higher as investors bet Democratic presidential nominee Joe Biden would beat President Donald Trump in Tuesday’s bitterly contested election. The dollar fell against a basket of currencies. U.S. Treasury prices were lower.
More than $3 trillion (2.3 trillion pounds) in government pandemic relief juiced economic growth last quarter, with nearly all segments rebounding strongly, with the exception of government spending and business investment in intellectual property products and nonresidential structures like gas and oil well drilling.
The economy grew at a historic 33.1 per cent annualized rate in the July-September period. That followed a record 31.4 per cent pace of contraction in the second quarter. Output remains 3.5 per cent below its level at the end of 2019. There is no deal in sight for another round of fiscal stimulus.
Unfilled orders at factories fell 0.2 per cent in September after declining 0.6 per cent in August. Inventories at factories were unchanged for a second straight month, while shipments of manufactured goods rose 0.3 per cent.
The government also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 1.0 per cent in September, as reported last month.
Shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, rose 0.5 per cent. They were previously reported to have gained 0.3 per cent.
Business spending on equipment rebounded at a 70.1 per cent rate in the third quarter, ending five straight quarters of decline.
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