Factory orders for April were released by the Commerce Department on Tuesday. The statistic tracks, in essence, how much the economy is asking producers to do.
Orders rose 0.7% from a month ago. This is good, but not great. In fact, April was the third straight month of good but not big growth in factory orders.
Another term for good, but not great, sustained growth: elasticity. The factory orders data contrasted with construction and consumer spending figures, which fell below analysts’ expectations last week. So what’s going on?
Keep in mind that April’s modest increase in factory orders follows a modest decline late last year, said Mike Montgomery, senior analyst at S&P Global Market Intelligence.
“Which, in combination, goes nowhere very slowly,” he said.
But there were some bright spots in Tuesday’s report. Demand for construction and industrial equipment increased by about 2% compared to a month ago.
Ned Hill, a professor of economic development at Ohio State University, said the federal government has something to do with that growth.
“It will remain strong because of the industrial spending that has been caused by the CHIPS Act and other national industrial policies. It’s just starting to go into the ground,” he said.
In other words, we have factories building factories – or at least making components that will go into making semiconductors and batteries.
And when it comes to consumer goods orders, “one surprise was that looking year over year, home appliances are holding up pretty well,” Hill said.
But there is evidence in the April data that several years of high interest rates are slowing some product lines, said Matt Colyar, an economist at Moody’s.
“If you look hard enough, you can see that there is a softening demand,” he said, citing new car sales. Still, Colyar added, while some other economic indicators eased, manufacturers have held up “quite admirably.”
If consumer spending remains sluggish, this will eventually hurt manufacturers. But for now, Colyar said, the factories seem to be moving forward.
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