Factory Orders Drop on Less Demand for Defense Goods

Factory Orders
Paul Sancya/APAn assembly line worker builds a Chrysler 200 automobile at the company's plant in Sterling Heights, Mich.

By Jason Lange

WASHINGTON -- A fall in demand for military equipment spurred a drop in new orders for U.S. factory goods in May, but signs of a healthy appetite for investment in the private sector pointed to broader strength in the economy.

The Commerce Department said Wednesday new orders for manufactured goods decreased 0.5 percent. That was a steeper drop than the 0.3 percent decline forecast by analysts.

Stripping out military wares, new orders rose a modest 0.2 percent.

U.S. factory output appeared to accelerate in the second quarter after lackluster activity during an unusually harsh winter. Data Tuesday pointed to U.S. manufacturing activity rising at a steady clip in June, while automobile sales raced to their highest level in almost eight years.

Wednesday's data reinforced the view that investment demand could support a sustained pickup in economic growth this year.

The Commerce Department left unchanged its previous estimate for a proxy for business investment demand, with new orders for non-military capital goods other than aircraft rising 0.7 percent in May.

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