Ahead of the Bell: Factory Orders

WASHINGTON - Orders to U.S. factories likely rose in May, reflecting strength in such areas as commercial aircraft and a key category that is viewed as a proxy for business investment.

Economists surveyed by Thomson Reuters expect factory orders rose 0.8 percent in May after a 0.7 percent increase in April. The Commerce Department will release the report Thursday at 10 a.m. EDT.

The report on factory orders covers both durable goods, items expected to last at least three years, and nondurable goods such as food, paper and chemicals.

The government last week reported that durable goods orders rose 1.8 percent in May, according to an advance report which will be revised Thursday.

The 1.8 percent preliminary reading on durable goods surprised analysts. They had expected a 0.6 percent decline.

The gain matched the rise in April with both months posting the best performance since December 2007, when the recession began. The strength came from a big rise in orders for commercial aircraft and a 4.8 percent jump in orders for non-defense capital goods excluding aircraft. That was the biggest increase in that category, which is viewed as a proxy for business investment, since September 2004.

Analysts saw the back-to-back gains in durable goods orders as further evidence that a dismal stretch for manufacturers may be ending. That view received support Wednesday when a report showed a key gauge of manufacturing activity declined less than expected in June.

The Institute for Supply Management said its manufacturing index posted a 44.8 reading in June, the best showing since August, a month before the financial crisis erupted with force.

Manufacturing sectors overseas also signaled a bit of a rebound, and sales of U.S. cars and trucks showed signs of stabilizing in June after a year of sharp declines.

While every major automaker except Honda Motor Co. reported lower sales in June, year-over-year declines last month slowed for four of the six major carmakers. Ford Motor Co. reported the smallest drop in a year, a 10.7 percent decline compared with June 2008.

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