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U.S. factory orders jumped 1.6% in May, but the increase was largely tied to petroleum-related products whose prices have risen sharply. A more recent survey of top executives suggests demand might be waning as the economy slows.
The increase in orders exceeded the 0.6% forecast of economists polled by The Wall Street Journal. The rise in new orders in April was also raised to 0.7% from 0.3%.
Yet a more recent poll of senior manufacturing executives signaled a slowdown in June. An index of manufacturing activity slipped to a two-year low as orders contracted for the first time since the start of the pandemic in spring 2020.
Other indicators also suggest the U.S. economy has softened.
The Federal Reserve is raising interest rates to try to tame the highest U.S. inflation in 40 years. By raising the cost of borrowing, the central bank aims to reduce demand and cool off what had been a rapidly growing economy.
Recent evidence suggests the Fed’s effort it starting to succeed. A growing number of economists even believe the U.S. could sink into recession within a year.
Also in the report:
—Durable-goods orders rose a revised 0.8% in May from an initially reported 0.7% increase.
—Orders for nondurable goods rose a much faster 2.3% in the month, but most of the increase was tied to demand for oil
—Another measure of factory conditions seen as a proxy for business investment rose by a revised 0.6%, the government said, a tick higher than originally reported.
These so-called core orders strip out the up-and-down transportation sector as well as government spending on military equipment. They are viewed by investors as a signal of future business prospects.
In early Tuesday trades, the Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
fell sharply.
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