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By Lucia Mutikani
WASHINGTON (Reuters) – New orders for products made in the United States accelerated in August, indicating continued strength in the manufacturing sector even as economic growth appeared to have slowed in the third quarter due to shortages of raw materials and workforce.
The Commerce Department said Monday that factory orders rose 1.2% in August. Data for July has been revised up to show that orders rose 0.7% in July instead of gaining 0.4% as previously reported. Economists polled by Reuters were expecting factory orders to rise 1.0%.
Orders increased 18.0% year-on-year.
The manufacturing sector, which represents 12% of the economy, is driven by a still strong demand for goods despite the return of spending towards services. Companies are replenishing depleted stocks in the first half of the year, supporting factory activity.
A survey by the Institute for Supply Management last week showed manufacturing activity was growing steadily in September, but noted that “businesses and suppliers continue to face an unprecedented number of hurdles in responding to demand. growing demand”.
According to the survey, all industries have been “impacted by record lead times for raw materials, continued shortages of critical materials, rising raw material prices and product transportation difficulties.”
Input shortages and the resulting high prices, made worse by the latest wave of COVID-19 infections, driven by the Delta variant, likely caused gross domestic product growth to slow sharply in the third quarter.
Data last Friday showed high inflation slashing consumer spending sharply in July, with a moderate rebound in August. The Atlanta Federal Reserve expects GDP growth to slow to an annualized rate of 2.3% in the third quarter. The economy grew at a pace of 6.7% in the second quarter.
The increase in factory goods orders in August was led by computers and electronics, metal products, transportation equipment, and electrical equipment, appliances and components. But there have been declines in orders for machinery and primary metals.
The Commerce Department also reported that orders for non-military capital goods, excluding aircraft, which are considered a measure of companies’ equipment spending plans, rose 0.6% in August to up 0.5% as shown last month.
Shipments of these basic capital goods, which are used to calculate the capital expenditure of companies in the GDP report, increased by 0.8%. Shipments of basic capital goods would previously have risen 0.7% in August.
Business capital spending was strong in the second quarter, marking the fourth consecutive quarter of double-digit growth. This helped push the level of GDP well above its peak in Q4 2019.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)
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