New orders for factory goods unexpectedly fell in the United States in June, a fresh sign that the slowdown in the country’s manufacturing sector will probably stretch into the second half of the year.
The Commerce Department said on Thursday that new orders for manufactured goods dropped 0.5 percent during the month. Economists in a Reuters poll had forecast a rise of 0.5 percent.
American factories appear to be one of the sectors most vulnerable to Europe’s festering debt crisis. The trend in American manufacturing has appeared softer and has added to concerns the economic recovery is losing steam. The decline in new orders in June will probably mean softer output down the road, which could weigh on economic growth.
Major automakers reported U.S. auto sales for July that were somewhat softer than expected as high U.S. unemployment and weak consumer confidence kept would-be buyers on the sidelines.
July auto sales showed the continuation of what has been a slowdown in growth since the late spring. Sales early this year shot past even the most bullish forecasts, but starting in May, the rate of improvement started to weaken.
"If we were talking in February this year and you asked me what we're going to have July, I'd say at least 14 and a half," said TrueCar.com analyst Jesse Toprak. "But we're going to barely get to 14."
GM, the largest U.S. automaker, reported on Wednesday a 6 percent drop in July U.S. sales, while Ford posted a 4 percent drop. The smallest U.S. automaker, Chrysler Group LLC, posted a 13 percent increase.
GM and Ford both pinned their declines on lower sales to fleet customers like rental car companies. GM's fleet sales fell 41 percent, in line with the company's forecast last month.
But their overall results were still lower than some estimates. Analysts had expected better financing deals, pent-up demand and increased construction spending to offset the sluggish U.S. economy.
Toyota sales were up 26 percent to 164,898 in July. A year ago, Toyota was still grappling with major vehicle shortages stemming from the March earthquake in Japan. In a release, Toyota said customers were taking advantage of long-term, low-interest financing at low lease rates.
Expect the Unexpected
Why economists could not see this coming is a mystery. Manufacturing new orders have collapsed virtually everywhere, including the US. GDP, a lagging indicator, is 1.5% annualized, well below the stall speed of 2%.