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US DATA: Factory Orders Pick Up In July, But Broader Dynamics Remain Poor

US DATA

US factory orders came in slightly stronger than expected in July, rising 5.0% M/M (0.1pp above consensus). That more than reversed two consecutive monthly declines (including -3.3% in June) to set an 8-month high in terms of the seasonally-adjusted nominal level of orders. Ex-transport orders also picked up but not nearly as dramatically, to 0.4% M/M (0.1% prior - there was no consensus). Elsewhere in the report, final durable goods orders saw only modest revisions vs the advance reading.

Despite this pickup, broader manufacturing sector dynamics remain poor. The pullback and rebound in manufactured goods orders growth was  driven by volatile aircraft orders - as flagged by the durable goods report previously released, and reflected by the ex-transport orders figure. The 3M/3M annualized rate of growth in factory orders was -2.3% in July, the slowest rate of growth since March. 

While the sector may be nearing a trough, there is little relief in sight in the near term. August's ISM Manufacturing report showed a stockbuilding-driven 0.4 point increase to 47.2, still very much in contractionary territory with new orders down a 5th consecutive month (down 2.8 points to 44.6).  Manufacturing activity will likely continue to contract in coming months but the risks of a harder landing appear smaller now that interest rates are on their way down, ISM survey chair Timothy Fiore told MNI Tuesday

 

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