US Factory orders: Manufacturing activity still declining but at a slower rate - Wells Fargo

According to analysts from Wells Fargo, today’s report on factory orders is consistent with weak spending in equipment and shows that manufacturing activity is still declining but at a slower rate.

Key Quotes:

“In a sense, the best that can be said about the outlook for the factory sector is that the slowdown in shipments and orders activity is moderating. Core capital goods shipments fell 0.5 percent in May, which was unchanged relative to the earlier estimate in the advance durable goods report. The three-month annualized rate of decline for this benchmark of business spending is now 5.2 percent which marks the slowest rate of contraction since November 2015.”

“Orders for core capital goods, a leading indicator for future spending was also negative, although the decline of just 0.4 percent is smaller than the initially reported drop of 0.7 percent.”

“Capital spending remains weak. Back-to-back declines in equipment spending in the fourth quarter of last year and the first quarter of this year create a very low base upon which any signs of life in equipment outlays could result in a positive number.”

“Unfortunately, what we have is nearly stall-speed manufacturing activity so any second quarter bounce in equipment outlays will be small in our view.”