New orders for US manufacturing goods climbed in May

• US  factory orders increased 1.6%, up from 0.7% in April.
• Data follows a string of negative figures on consumer spending.
• In May, the Federal Reserve raised interest rates by 0.5 percentage points, followed by a more aggressive 0.75 percentage point hike in June.

In May, US factory orders grew more than anticipated, indicating that demand remained robust despite soaring inflation and rising interest rates.

In May, factory orders increased 1.6%, up from 0.7% in April, according to data released by the US Census Bureau on Tuesday. Refinitv’s survey of economists predicted a 0.5% increase.

As a proxy for business investment, new orders for non-defense capital goods excluding aircraft increased by 0.6% in May, following an increase of 0.5% in April.

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The data follows a string of negative figures on consumer spending, which indicated a fall in spending that may be indicative of deteriorating demand. The Commerce Department announced this week that personal consumption increased only 0.2% in May, a 0.4% decline when adjusted for inflation. The manufacturing index of the Institute for Supply Management decreased in June, as rising borrowing rates and inflation caused the new order rate to decline.

In May, the Federal Reserve raised interest rates by 0.5 percentage points, followed by a more aggressive 0.75 percentage point hike in June. In the future, tighter monetary policy and rising inflation could reduce industry order demand.

In May, however, new orders for manufactured durable goods, which include everything from washing machines to automobiles and aircraft, jumped 0.8% from April’s 0.4%. The demand for transportation equipment increased by 1 percent from April to May. In April, new orders for manufactured nondurable items grew by 2.3%.

In February, unfulfilled orders for durable goods grew by 0.4%, following an increase of 0.5% in April. Transportation equipment exhibited the greatest growth, increasing by 0.5%.