Fleet Management

Economic Watch: Factory Shipments, Orders Post Solid Gains

August 05, 2014

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UPDATED -- Shipments and orders for manufactured goods both rose solidly in June, according to a new U.S. Commerce Department report.

Shipments increased 0.5% from the month before following a May drop of 1%, hitting its highest level on record. Manufactured durable goods shipments gained 0.4% following an upwardly revised May increase of 0.1%, also a new high. Both also recorded their fourth increases out of the last five months.

New orders for manufactured goods in July gained 1.1% from the month before following a May decline of 0.6%. The level breaks the previous record and is the fourth increase in the last five months. Excluding the volatile transportation orders sector, the increase for June was still 1.1%, the largest since July 2013.

New orders for manufactured durable goods posted its fourth increase in the last five months during June, gaining 1.7%, following a downwardly revised May decline of 0.9%. New orders for machinery led the hike, picking up 2.9% in June from May.

Meantime, economic activity in the non-manufacturing sector grew in July for the 54th consecutive month, hitting it fastest pace since 2008, according to the nation's purchasing and supply executives in the latest Non-Manufacturing Index from the Institute for Supply Management.

The NMI registered 58.7% in July, 2.7 percentage points higher than the June reading of 56%, the highest reading since the index was created in Jan. 2008.

The Non-Manufacturing Business Activity Index increased to 62.4%, which is 4.9 percentage points higher than the June reading of 57.5%, reflecting growth for the 60th consecutive month at a faster rate and the highest reading since February 2011.

The New Orders Index registered 64.9%, 3.7 percentage points higher than the reading of 61.2% registered in June, the highest reading since August 2005.

The Employment Index increased 1.6 percentage points to 56% from the June reading of 54.4% and indicates growth for the fifth consecutive month.

According to the NMI, 16 of the 17 non-manufacturing industries reported growth in July. “Respondents' comments indicate that stabilization and/or improving market conditions have positively affected the majority of the respective industries and businesses,” said ISM.

"The service ISM has rebounded in recent months, offsetting the weakness at the start of the year, a similar trend seen in the overall economy with GDP posting an impressive 4% gain after a more than 2% decline at the start of the year," said Lindsey Piegza, chief economist at the investment firm Sterne Agee. "Parsing out the volatility of the first six months of the year, however, average service sector activity is little changed from levels seen since 2010."

She said, going forward, in order to maintain heightened activity, demand will have to ramp up markedly. "However, with job creation still dominated by part-time employment, and income growth slowing noticeably, expectations of momentum are under pressure."

Update adds analyst comments.

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