Factory orders in U.S. increased less than forecast in April

Orders placed with U.S. factories rose less than forecast in April as demand for non-durable goods dropped, probably reflecting lower fuel costs.

The 1% increase in bookings followed a revised 4.7% decline the prior month, the Commerce Department reported today in Washington. The median forecast of 61 economists in a Bloomberg survey predicted orders would climb by 1.5%. Demand for durable goods, those meant to last at least three years, rose 3.5%, while that for non-durables decreased 1%.

The increase in orders for durables probably means companies are looking beyond the slowdown in economic growth this quarter as housing rebounds and consumer confidence improves. At the same time, government cutbacks are restraining total demand and employment, which means the rebound will be slow to develop.

“The economy is gradually healing, and as we move through time you’ll see manufacturing do better,” Michael Moran, an economist at Daiwa Capital Markets in New York, said before the report. Moran, who is the second-best forecaster of factory orders in the last two years based on Bloomberg data, predicted a pick-up as the effects of fiscal tightening wear off. “I think what is happening, and what has to happen, is that we just finish the healing process that has been ongoing.”

Estimates in the Bloomberg survey ranged from a drop of 0.3% to a 3.9% gain. The Commerce Department revised March’s figure from a previously reported 4.9% decrease.

Companies hired fewer workers than projected in May as federal budget cuts and higher taxes stifled greater improvement in the labor market, another report showed today.

May Employment

Employment increased by 135,000 workers following a revised 113,000 gain in April that was smaller than initially estimated, the ADP Research Institute reported. Based in Roseland, New Jersey, the institute is a division of Automatic Data Processing Inc., a company that manages employer payrolls. The median forecast of 40 economists surveyed by Bloomberg called for a May advance of 165,000.

Payrolls expanded by 165,000 workers in April following a 138,000 increase in March, Labor Department figures showed last month. The jobless rate unexpectedly declined to a four-year low of 7.5%, the report also showed.

Data for May are due Friday, and economists surveyed by Bloomberg project payrolls rose about the same pace as in the prior month and unemployment was unchanged.

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