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Business Title: Factory Orders in U.S. Increase 1.2%, Signaling Strength in Manufacturing June 3 (Bloomberg) -- Orders placed with U.S. factories rose in April for an eighth month, a sign of strength in manufacturing at the start of the second quarter. The 1.2 percent increase in bookings followed a revised 1.7 percent gain in March that was larger than previously estimated, the Commerce Department said today in Washington. Factory shipments rose 0.6 percent. Companies including Dow Chemical Co. and Deere & Co. are seeing increases in orders from around the world as inventories are replenished and investment in equipment picks up. Corporate and consumer spending may help the expansion withstand the European debt crisis. “Business investment remains healthy,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “Business capital spending will continue to lead the economy.” Economists forecast orders would rise 1.8 percent, according to the median projection in a Bloomberg News survey. Estimates ranged from increases of 0.6 percent to 3.5 percent. Service industries expanded in May for a fifth month. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, held at 55.4 for a third month. Readings above 50 signal expansion. Stocks Rise Stocks held gains and Treasury securities fell after the reports. The Standard & Poor’s 500 Index increased 0.1 percent to 1,099.7 at 11:29 a.m. in New York. The 10-year Treasury note declined, pushing up the yield to 3.37 percent from 3.34 percent late yesterday. Orders excluding transportation goods, such as airplanes and which are volatile month to month, fell 0.5 percent after a 3.8 percent surge in March. Earlier today, the Labor Department said initial jobless claims fell 10,000 last week to 453,000. The number of people receiving unemployment insurance and those getting extended payments increased. Demand for durable goods, which make up just over half of total factory demand, increased 2.8 percent. The government had reported last week that bookings for these had increased 2.9 percent. Shipments of durable goods rose 1.4 percent. Bookings of non-durable goods, including food, petroleum and chemicals, decreased 0.1 percent, led by petroleum and food. Business Equipment Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, decreased 2.6 percent after a 6.7 percent surge in March. Shipments of these goods, used in calculating gross domestic product, were unchanged after rising 2.3 percent. Rising profits, the need to rebuild inventories and demand from overseas have prompted companies to increase spending on equipment and resume hiring. Deere, the world’s largest farm equipment maker, on May 19 reported second-quarter profit that topped analysts’ estimates and raised earnings and sales forecasts for a second time this year. The company is benefiting from growing demand for machinery such as tractors and signs of stabilization in U.S. construction-equipment markets. “Our performance, no doubt, reflects some improvement in overall economic conditions,” spokeswoman Susan Karlis said on a conference call. “It certainly reflects strong demand for large farm machinery in the United States and other key markets.” Factory Inventories Factory inventories rose 0.5 percent for a second month in April. Manufacturers had enough goods on hand to last 1.24 months at the current sales pace. Manufacturers now face the risk of a slowdown in exports as the debt crisis threatens Europe’s economy and China takes steps to prevent its residential real estate market from overheating. China’s manufacturing expanded in May at a slower pace, reports from the Federation of Logistics and Purchasing and from HSBC Holdings Plc and Markit Economics showed June 1. Dow Chemical, the world’s second-largest chemical maker, said June 2 financial markets shouldn’t panic over the European debt crisis or Chinese growth because its sales indicate consumer demand is improving in both regions. April sales topped the monthly average in the first quarter and May was probably stronger, Chief Executive Officer Andrew Liveris said in a webcast from New York. Order books show the gains are continuing, he said. “When I come to Wall Street, I feel like the sky is falling. When I go back to Main Street, everything is fine, folks. Stop panicking,” Liveris told investors gathered at the Goldman Sachs Basic Materials Conference. “Demand is good.” Liveris also said U.S. consumer spending is rising on everything from appliances and cars to electronics.
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