US factory orders likely slipped slightly in May, reflecting drop in aircraft orders

EnergyAssociated Press

The Commerce Department reports on May factory orders Thursday at 10 a.m. Eastern.

ORDERS DOWN: Economists believe that orders dipped 0.5 percent, according to a survey of economists by data firm FactSet.

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FACTORY PRESSURES: Orders dipped 0.4 percent in April, showing how manufacturers were wrestling with a strong dollar and cheap oil.

The report Thursday will update an estimate made last week that orders for durable goods fell 1.8 percent in May as well as provide information on how orders fared for non-durable goods such as chemicals, paper and food.

The preliminary report showed that durable goods orders were held back by a big drop in demand for aircraft. But a category that reflects business investment plans was up 0.4 percent in May, reversing a 0.3 percent drop in April. This category has been hurt by spending cutbacks by energy companies as oil and natural gas prices fell over the past year.

American factories have also struggled this year because a strong dollar has made U.S. goods more expensive overseas.

Those factors, combined with an unusually harsh winter, sent the economy into reverse in the January-March quarter with overall activity, as measured by the gross domestic product, falling at an annual rate of 0.2 percent. But economists are optimistic that economic activity rebounded in the April-June quarter to growth of around 2.5 percent and will strengthen further in the second half of this year.

The expectation is that continued solid gains in employment will boost household incomes and spur stronger consumer spending, which accounts for 70 percent of economic activity.

The Institute for Supply Management reported Wednesday that its gauge of manufacturing activity rose to 53.5 in June, up from 52.8 in May. The June reading matched January's level for the highest this year. The June performance was seen as evidence that manufacturing growth has accelerated over the past two months. Any reading above 50 signals expansion.