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First Cut: May new orders for factory goods benefit from pent-up demand

New orders for all factory goods were up 8.0% in May from June after falling 13.5% in April from March (previously down 13.0%). The increase was much as expected. New orders for durable goods were up 15.7% in May, in large part due to a surge of 82.0% in transportation related to motor vehicles and defense aircraft orders. However, excluding durables, new orders were up 3.7% which indicated that there was some resurgence of demand in most other sectors. Nondurables orders were up 2.0% and reflected higher prices for food and energy goods. In any case, the dollar value of new orders remains substantially below the start of the year before the pandemic had an impact on activity.

“Core” new orders – durables orders less civilian aircraft and defense capital goods – were up 7.2% in May as orders displayed some pent-up demand following two very soft months.

Unfilled orders inched up 0.1% in May in part as cancellations in aircraft orders tapered off. Shipments were up 2.8% in May, some of it increased dollar value of items like petroleum and food items, but also because of increased production and freer movement along supply chains. Inventories were up 0.2% in May with some modest replenishment needed after working down available stocks in recent months.

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