US factory orders fall more than expected
Year-on-year increase reflects tax cut’s boost to consumers, limited effect on weak capex
US factory orders for May came in a bit lower than expected, at -0.8% month-on-month. That’s still a respectable 7.4% year-on-year increase, although the composition of orders is heavily skewed to transportation equipment. Take out airplanes and automobiles and there isn’t a lot there.
We have the composition of orders by industry through April, and it shows extremely weak capital investment in construction, oil field, materials handling and industrial machinery. Electrical machinery (mainly computers and accessories) show some strength but the dollar volume of orders is lower than it was at the 2008 peak.
Given widespread bottlenecks in American oil production and transportation, the lack of orders is surprising. The effect of the tax cut on consumers is visible in purchases of big-ticket items, but it hasn’t helped capex.