Defense spending lifts US factory orders in April

(Reuters) - New orders for U.S.-made goods rose for a second straight month in April, boosted largely by defense spending, but the overall manufacturing industry continued to struggle under the weight of higher interest rates.

Factory orders increased 0.4% after a 0.6% gain in March, the Commerce Department said on Monday. Economists polled by Reuters had forecast orders would rise 0.8%. Orders increased 1.4% through April from a year earlier.

The sector, which accounts for 11.3% of the economy, is being dragged down by the Federal Reserve's fastest interest rate hiking campaign since the 1980s.

Banks also have tightened lending following the recent failures of three U.S. banks, while spending is shifting away from goods, typically bought on credit, to services.

Businesses are cutting back on restocking in anticipation of weaker demand later this year. The Institute for Supply Management last week said its manufacturing PMI contracted for a seventh straight month in May.

Orders for transportation equipment increased 3.7% on top of a 9.8% jump in March. Civilian aircraft orders fell 8.5% after having surged by 96% in the prior month. Motor vehicle orders edged up 0.5%. Excluding transportation, orders fell 0.2%, dropping for a third straight month and to their lowest since February 2022.

Orders for machinery rose 1.0%, but bookings for computers and electronic products fell 1.4%. Orders for electrical equipment, appliances and components dropped 1.7%.

Shipments of manufactured goods fell 0.4%. The inventory of manufactured goods at factories rose 0.5%. Unfilled orders at factories rose 0.8%.

The Commerce Department also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, rose 1.3% in April instead of 1.4% as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, rose 0.5%, unchanged from what was previously reported. Business spending on equipment has contracted for two straight quarters.

(Reporting by Dan Burns; Editing by Chizu Nomiyama and Paul Simao)

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