U.S. manufacturing rebounds on positive orders data

June 27, 2012

After several disappointing months for the industry, U.S. manufacturing is showing signs that it is not succumbing to the potential collapse of the global economy, as a new report outlined gains that were made in the sector in May.

The Associated Press reported that the Commerce Department announced that U.S. factories received more orders for long-lasting manufactured goods last month, reversing the tide after two months of less-than-expected expansion.

According to the news outlet, the government agency announced that orders for durable goods rose 1.1 percent in May, along with an increase in the so-called core capital goods, a rise of 1.6 percent for the month.

After two months of drops, though still in positive territory, companies began to order more machinery, computers and heavy equipment in May. Durable goods orders are one of the most volatile sectors within manufacturing, so the data provides a mixed message to analysts.

"All in, the improvement in May is, again, a relief," Jennifer Lee, a senior economist at BMO Capital Markets, told the AP. "However, smoothing out the monthly wiggles in core orders shows a decelerating trend…. In other words, continued uncertainty over Europe’s debt crisis and the fiscal problems in the U.S. are still hurting business and consumer confidence, and suggests only modest growth as we enter the second half of 2012."

Reuters reported that companies have had to adjust their business strategy, given the slow economic growth in China and a looming recession in the debt-ridden euro zone. Because of these external factors any positive data shows the U.S. manufacturing is faring better than most of its foreign counterparts.

"Once again, U.S. economic data is confounding the critics," Price Futures Group oil analyst Phil Flynn told the AP. "Maybe the economy isn't so dreary."

Although the orders data proved positive for the U.S. sector, many economists are waiting for the national manufacturing report before making any claims as to the state of the industry.

MarketWatch reported that many economists have yet to make a prediction about the overall state of the industry, as they are waiting for the foreign developments to run their course.

"The good news is that the manufacturing sector is asleep, not dead, but this little nap seems likely to last a few months," Stephen Stanley, chief economist of Pierpont Securities, told the news outlet.