Key facts
- New orders for U.S. factory goods rose 0.9% in July.
- This figure exceeded economists' expectations of a 0.6% increase.
- The rebound was primarily driven by a 12.7% surge in orders for civilian aircraft and parts.
- Orders for non-defense capital goods excluding aircraft were unchanged, indicating a potential slowdown in business spending plans.
- Manufacturing, a key sector of the economy, is receiving a boost from AI buildout.
New orders for U.S. factory goods rose more than anticipated in July, signaling a rebound in demand, particularly for aircraft. The Commerce Department's Census Bureau reported that factory orders increased by 0.9% in July, following a revised 0.2% decrease in June. This figure surpassed the 0.6% increase forecast by economists polled by Reuters.
On a year-over-year basis, orders advanced 6.5% in July. Manufacturing, which constitutes 9.4% of the U.S. economy, is benefiting from the buildout of artificial intelligence infrastructure. However, ongoing geopolitical tensions, such as the six-month U.S.-Israeli war with Iran, are contributing to supply chain strains and elevated input prices. A recent Institute for Supply Management survey indicated that manufacturers are experiencing higher prices due to these factors.
The July rebound in factory orders was significantly boosted by a 12.7% surge in orders for civilian aircraft and parts. Additionally, orders for motor vehicle bodies, parts, and trailers saw a 0.4% increase, and machinery orders grew by 0.8%. In contrast, orders for computers and electronic products declined by 1.1%, although they remain up 14.3% year-over-year. Orders for electrical equipment, appliances, and components fell by 0.3%.
The report also indicated that orders for non-defense capital goods excluding aircraft, a key measure of business spending on equipment, were unchanged in July, contrary to an earlier estimate of a 0.2% rise. Shipments of these core capital goods increased by 1.2%, slightly below the initial estimate of 1.4%. Analysts suggest the slowdown in core capital goods orders may be temporary, citing a recent surge in capital goods imports and continued business spending fueled by AI investments.