Orders to U.S. factories rise on demand for machinery, computers

Construction Equipment

Orders for machinery increased 0.7%, led by a 7.6% jump in construction equipment. Demand for computers rose 8.8%.

Home values continue to rise, boosting sales and prompting builders to step up housing starts, which in turn generate more orders for building materials, furniture and appliances.

Construction spending climbed in May, led by the strongest expenditures on residential projects in more than four years, the Commerce Department reported yesterday. Los Angeles-based KB Home is among builders raising prices and buying land, President and Chief Executive Officer Jeffrey Mezger said.

“If a consumer feels good about their personal situation, they will always work through any obstacles and find a way to become a homeowner,” Mezger said on a June 27 earnings call. “With job growth accelerating and consumer confidence hitting a five-year high last month, I expect the housing recovery will continue its solid advance.”

Autos, Homes

Automakers and homebuilders are helping keep America’s factories busy. Vehicle purchases increased to a 15.24 million annual rate in May, the strongest in three months, according to figures from Ward Automotive Group. Purchases probably climbed to a 15.5 million rate in June, the most since June 2009, according to the median forecast of economists surveyed before industry data today.

Today’s report showed manufacturers are having trouble boosting stockpiles as demand improves. Factory inventories were unchanged in May after climbing 0.1% the prior month. Manufacturers had enough goods on hand to last 1.3 months at the current sales pace, down from 1.31 the prior month.

Manufacturing, which accounts for about 12% of the economy, is projected to keep contributing to growth this year. At the same time, the outlook may be clouded by across-the-board federal spending cuts that began on March 1, when lawmakers failed to reach a compromise on ways to reduce the debt.

A report yesterday showed American factories rebounded in June as orders picked up. The Institute for Supply Management’s manufacturing index climbed to a three-month high of 50.9 from 49 in May. A reading of 50 is the dividing line between expansion and contraction.

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