Factory orders rise in July as U.S. manufacturing gains slightly

August 31, 2012

The outlook for U.S. manufacturing has been constantly changing in the past year, as every round of good news has been followed by a slight drop in projections, or vice versa. However, this has made production companies in the country more versatile, as an adoption of lean manufacturing principles or an adjusted business strategy usually follows any negative news.

The Associated Press reported that orders to U.S. companies rose during July, as a significant surge in the demand for autos and commercial aircraft benefited the sector. However, despite this good news, manufacturers braced for potential drops in production, due to a drop in the business investment index within the factory orders category.

According to the news outlet, factory orders rose 2.8 percent in July, which marked the biggest overall gain in a year, as the Commerce Department report noted that motor vehicles and airplane sales helped to prop up the industry.

While the orders were up for the month, investment spending took quite a tumble in July, with this indicator dropping 4 percent, marking the fourth setback in the past five months.

The AP reported that one of the major concerns for many businesses is the state of the global economy, and negative news coming out of China and Europe is expected to drag this number down further in the near future.

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

Other economists agreed with this assertion, as they noted that the sector may continue to suffer from a drop in investment.

"We’re seeing manufacturers a bit concerned," Megan Ellis, associate economist at John Hancock Financial Services in Boston, told Bloomberg News. "Overall, manufacturers are very nervous about what demand will be."

Manufacturers expressed these same doubts regarding the global economy, as many highlighted how little money would be coming in unless stimulus action was taken in Europe or a recovery occurred in China.

"There’s still a lot of uncertainty regarding the European economy, the pace of a general industrial recovery in China as well as the potential for a fiscal cliff in the United States," Jim Shaw, chief financial officer of Minneapolis-based Donaldson Co. Inc. (DCI), told the news outlet.