Factory orders jump 2.9 percent

Increase mainly reflects a surge in the sales of Boeing commercial jets

July 06, 2005|By James P. Miller | James P. Miller,CHICAGO TRIBUNE

U.S. manufacturers saw a hefty 2.9 percent increase in orders in May, but the jump, rather than signaling a broad improvement for the industrial sector, primarily reflected a surge in Boeing Co.'s often volatile commercial jet sales.

The Commerce Department reported yesterday that factory orders rose to $394.13 billion in May from $383 billion in April, the strongest month-over-month increase in 14 months.

Despite the May increase, however, "signals are still mixed for manufacturing," said Marisa DiNatale, an economist with the consulting firm Economy.com.

Excluding the transportation sector, which is frequently skewed by the timing of multibillion-dollar jetliner orders, manufacturing orders fell 0.1 percent in May, their second-straight monthly decline.

Economists and investors track factory orders as an indicator of future economic activity, because orders translate into industrial production.

The May orders report, which was in line with economists' expectations, suggested that the pace of growth in the manufacturing sector has been slowing through the spring.

"The outlook remains for moderate gains for orders," said Wachovia economist John Silvia, "at a pace below that of last year but still solid enough to contribute to overall economic growth."

May orders for durable goods, big-ticket items such as automobiles, household appliances and aircraft, rose 5.5 percent, the report showed.

That increase was fueled by a 165 percent jump in orders for civilian aircraft and parts. That reflects in large part the extraordinary 200 aircraft orders that Boeing recorded in May. Chicago-based Boeing is benefiting from a hot-selling new aircraft design as well as strengthening industry conditions.

Other segments didn't fare so well. Computer-equipment orders tumbled 12 percent in May, reversing a 26 percent jump the sector enjoyed in April, and orders for industrial machinery dropped 15 percent after rising 8 percent in the previous month.

"Excluding aircraft, order growth wasn't that impressive," Wesley Beal, chief U.S. economist at IDEAglobal.com, told Bloomberg News.

But he emphasized that the soft May orders report "isn't as much a concern" as it might be, because positive June industry data released last week indicate manufacturing activity "will pick up well in the third quarter."

Late last week, the Institute for Supply Management disclosed that its factory index rose to a stronger-than-expected 53.8 reading in June from a relatively sluggish 51.4 level in May. The ISM report brought cheer to investors who have been concerned over the manufacturing sector's apparent loss of momentum.

The Chicago Tribune is a Tribune Publishing newspaper.

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