In July, new orders for U.S. made goods reported their largest decline in almost three years, but orders for capital goods were stronger than previously reported, directing to a faster pace of business spending at the beginning of Q3.

Factory goods orders dropped 3.3 percent among a collapse in demand for transportation equipment, the Commerce Department reported on Tuesday. That was the largest fall since August 2014. June’s data was adjusted to display orders increasing 3.2 percent instead of the previously reported 3.0 percent hike.
July’s decline in factory orders was right on pace with economists’ projections. Manufacturing, which amounts for about 12 percent of the U.S. economy, is strengthening even as motor vehicle production has dropped and the increase from oil and gas drilling is starting to diminish as plentiful supplies restrain crude oil prices.

The dollar was trading lower against a basket of currencies, while prices for U.S. Treasuries increased. Tuesday’s report also displayed orders for non-defense capital goods not including aircraft – seen as a measure of business spending plans advanced 1.0 percent in July instead of increasing 0.4 percent as reported in August.

Orders for these supposed core capital goods dropped 0.1 percent in June. Shipments of core capital goods, which are used to measure business equipment spending in the gross domestic product report, hiked 1.2 percent in July instead of the previously reported 1.0 percent rise.

In July, orders for computers and electronic products hiked 2.1 percent, the largest increase in a year. Orders for electrical equipment, appliances and components hiked 2.6 percent, also the largest advance in 12 months.
Machinery orders, however, dropped 0.9 percent. That was the biggest drop in nine months and followed a 0.5 percent increase in June. Orders for industrial machinery dropped 0.8 percent.

Motor vehicle orders decreased 0.9 percent after being unchanged in June. Auto sales hiked last December, leading to a drop in motor vehicle production as manufacturers work to cut an inventory surplus.

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Production could get a push from an anticipated hike in demand for automobiles as residents in storm-ravaged Texas replace flood-damaged vehicles.

In July, unfilled orders at factories dropped 0.3 percent after advancing 1.3 percent in June. Manufacturing inventories hiked 0.2 percent while shipments gained 0.3 percent. As a result, the inventories-to-shipments ratio declined to 1.37 from 1.38 in June.