Transportation Gives Factory Orders a Lift in July

Elaine Thompson/APA Boeing employee playfully shows off his muscles while working on a Boeing 787 jet at the company's plant in Everett, Wash.
By Lucia Mutikani

WASHINGTON -- New orders for U.S. factory goods jumped in July and automobile sales in August were unexpectedly strong, offering further signs of strength in the manufacturing sector.

The Commerce Department said Wednesday new orders for manufactured goods increased a record 10.5 percent on robust demand for transportation equipment. June's orders were revised to show a 1.5 percent increase instead of the previously reported 1.1 percent rise.

Orders excluding the volatile transportation category slipped 0.8 percent in July. But that followed a 1.4 percent increase the prior month, leaving the overall trend positive for manufacturing activity.

Separate reports from automakers suggested August sales were set to reach volumes not seen since before the 2007-2009 recession, as Ford Motor (F), Chrysler Group and Nissan Motor easily beat analyst estimates.

Ford's sales were up 0.4 percent, while Chrysler, a unit of Fiat, showed a 20 percent gain, the automakers reported on Wednesday. Nissan's sales were up 11.5 percent. Analysts looked for sales gains of 11.8 percent for Chrysler and 2.8 percent for Nissan, and a decline of 1.9 percent for Ford.

General Motors (GM) said August sales fell 1.2 percent, narrowly missing expectations.

Manufacturing is accelerating, with the Institute for Supply Management reporting Tuesday that its gauge of factory activity hit its highest level in nearly 3½ years in August. In addition, a measure of new orders touched a 10-year high.

Economists say the acceleration in factory activity suggested a pickup in business spending on capital and supported their forecasts for sturdy growth in the third quarter.

Growth estimates for the July-September period range as high as a 3.5 percent annual pace. The economy expanded at a 4.2 percent rate in the second quarter.

The dollar was trading lower against the euro and the yen, while U.S. stocks rose.

Record Orders

Orders for transportation equipment soared a record 74.1 percent in July, reflecting outsized civilian aircraft orders received by Boeing (BA) that was flagged in the durable goods orders report published last week.

Auto orders rose 7.3 percent, the largest increase since March 2011, and capital goods orders surged a record 52.5 percent. But orders for primary metals, machinery, computers and electrical equipment, appliances and components fell.

Unfilled orders at factories increased 5.4 percent, the largest advance since June 2000. That followed a 1 percent gain in June.

The Commerce Department also said orders for durable goods, manufactured products expected to last three years and more, increased a record 22.6 percent in July, as reported last week.

Durable goods orders excluding transportation slipped 0.7 percent instead of the previously reported 0.8 percent fall.

Orders for non-defense capital goods excluding aircraft -- seen as a measure of business confidence and spending plans -- declined by a slightly bigger 0.7 percent. They were previously reported to have slipped 0.5 percent.

-With additional reporting by Bernie Woodall and Ben Klayman in Detroit.

9 Numbers That'll Tell You How the Economy's Really Doing
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Transportation Gives Factory Orders a Lift in July
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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