WASHINGTON – New orders at U.S. factories rose 2.9 percent in May, exactly in line with analyst expectations, on an aircraft-led jump in durable goods, a government report showed Tuesday.
The increase was the largest factory orders gain in more than a year, and followed a slightly downwardly revised 0.7 percent advance in April, the Commerce Department (search) said.
Much of the factory orders strength came from durable goods — big-ticket items meant to last three years or more — which rose 5.5 percent. Durables, which make up more than half of factory orders, surged in May after Boeing reported 200 new aircraft orders in the month.
Markets showed little reaction to the factory goods data, which was previewed in large part in the preliminary report on durables issued last month.
Transportation equipment orders roared ahead 21.2 percent in May. Excluding the volatile transportation sector, total factory orders fell 0.1 percent.
"We had a lot of transportation gains," said Stephen Gallagher, chief U.S. economist at SG Corporate & Investment Banking in New York. "It seemed to be on the weak side once you stripped out the aircraft orders."
Gallagher saw the report contrasting with an Institute for Supply Management (search) survey published Friday, which showed the U.S. manufacturing sector growing quickly in June despite soaring energy prices.
Non-defense capital goods excluding aircraft fell 2.5 percent in May, the weakest reading for the key measure of business confidence since October 2004. The fall erased a 1.7 percent April gain in the category.
Michael Englund, chief economist at Action Economics (search), said strong aircraft orders had plumped the factory orders report enough to make it a difficult gauge.
"When you look at ex-aircraft, there is weakness after the big surge in factory orders at the turn of the year into the first quarter," Englund said. "We view this as a zigzag in an otherwise fairly solid growth trend (for the economy)."
May orders for nondurable goods rose a paltry 0.1 percent.
Factory inventories were unchanged in May, the government said. The inventories-to-shipments ratio, a measure of how quickly stocks would run out at the current shipment pace, was also unchanged at 1.24 months' supply.