U.S. Factory Orders and Services Sector Declines in May

Monday data reports point to a decline in manufactured goods in April for the first time in five months. Factory Orders were lower and worker productivity remained unchanged during the first quarter of the year, while reports indicate a slowdown in the services sector in May.

New orders slipped in May despite strong employment figures.

Factory Orders

The economy added 138,000 jobs last month, according to reports from Friday, down from 174,000 jobs created in April. Stocks remained strong while investors await the Federal Reserves policy meeting between June 13 and 14. The Fed should increase borrowing costs after an interest rate increase in March of 25 basis points.

The Institute for Supply Management reported non-manufacturing activity of 56.9, down six-tenths of a percentage point. The reading is indicative of an expanding sector despite activity slowing. New orders in the services industry are down 5.5 percentage points, while production fell 1.7 percentage points on the month. Services sector employment is on the rise, rising 6.4 percentage points in May to hit its highest level since July 2015.

Factory Orders Lower


The Commerce Department released an additional report on Monday, showing factory goods orders falling 0.2% in April. The year prior, factory orders rose 4.4%. Non-defense capital goods rose 0.1% up from a flat reading the month prior.

A recovery in the energy sector helped support manufacturing last month. The manufacturing sector accounts for 12% of the U.S. economy.

Investor sentiment is down thanks to an expected slowdown in motor vehicle sales in the coming months. Employment in the auto industry fell by 1,500 in May, as manufacturers expect sales to slump. Ford Motor Co. (NYSE:F) expects profits to fall 50% in the current quarter. Rising costs and falling sales are to blame for the bleak forecast.

Transportation equipment orders fell 1.4%, with nondefense aircraft orders also falling 9.1%. Electrical equipment orders also fell last month, down 2.0%, while primary metals also fell 0.7% on the month.

The following two tabs change content below.