US factory orders fell 0.5 pct in June

[August 03, 2012]  WASHINGTON (AP) -- Companies placed fewer orders with U.S. factories in June from May, signaling further weakness with manufacturing.

The Commerce Department said Thursday that factory orders fell 0.5 percent in June, the third decline in four months.

Orders for core capital goods, considered a good proxy for business investment, dropped 1.7 percent. Demand fell for heavy machinery, computers and autos.

Manufacturing, a key source of growth in the U.S. since the recession ended in June 2009, has weakened in recent months along with the broader economy.

U.S. consumers and businesses have cut back on spending, which has lowered demand for factory goods. Europe's economic woes and slower growth in China, India and Brazil have also reduced demand for American exports.

U.S. manufacturing shrank for the second straight month in July, according to a survey by a trade group of purchasing managers.

"The recent softness in manufacturing activity and capital spending is likely to continue, at least for several more months," said Steven Wood, chief economist at Insight Economics.

U.S. factory orders in June totaled $465.8 billion, up 42.5 percent from the recession low hit in March 2009.

Demand for long-lasting goods, items such as autos and airplanes, increased 1.3 percent in June. Demand for non-durable goods such as petroleum products, fell 2 percent.

The rise in durable goods was driven by a surge in volatile demand for commercial aircraft, which jumped 14.2 percent. Orders for motor vehicles and parts fell 0.7 percent, the second decline in the past three months.

Orders for machinery fell 2.1 percent, reflecting declines in demand for metal working machinery and electric turbines. Demand for computers and other electronic products dropped 4.4 percent.

The fall in nondurable goods reflected declines in demand for textiles, chemicals and petroleum products.

Overall economic growth slowed to an annual rate of just 1.5 percent in the April-June quarter, down from an already lackluster 2 percent growth rate in the January-March quarter.

The economy isn't growing fast enough to lower the unemployment rate.

The Labor Department reports on July unemployment and job growth Friday. Economists predict employers added 100,000 jobs last month. That would be slightly better than the 75,000 a month average from April through June but still below the healthy 226,000 average in the first three months of the year. The unemployment rate is expected to stay at 8.2 percent.

The Federal Reserve cited the weaker growth in a statement Wednesday in which Fed officials repeated a pledge to try to boost growth in hiring remains weak. The Fed statement noted that growth has slowed in the first half of the year with job creating slackening and consumer spending tapering off.

Many economists believe the Fed will launch another round of bond buying at its September meeting in an effort to give the economy a boost by pushing long-term interest rates lower.

[Associated Press; By MARTIN CRUTSINGER]

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