April’s Rapid Rise in Factory Orders Reveals American Consumers’ Priorities


    The April rise in factory orders was higher than expected. Analysts had expected a 1-percent increase. The dramatic increase in orders shows that U.S. consumers’ demand for goods is not diminishing. Orders for factory goods have increased in 22 of the last 23 months. The household budget shifted aggressively to goods from services during the first few weeks of the pandemic and hasn't yet fully returned to the previous pattern. Although some expenditure on services is recovering, such as eating out, many remain well behind. For instance, gym memberships are at a low level, while purchases of fitness equipment are still high.

    The factory-order numbers aren't adjusted for inflation. Many observers believe that the large jump in the April numbers was caused mostly by the rise in prices. Orders for durable goods were revised from a 0.8-percent increase to a 1.1-percent increase in March. It is worth noting that the Producer Price Index of final demand for durable goods, a measure of what producers and retailers receive in exchange for the durable items, increased by 1 percent in March. This suggests that almost all the gain in March was due to the rise in prices.

    Orders for non-durable products increased 3.2 percent over the course of the month. This is likely due to rising food and energy prices. The Producer Price Index for energy increased by 5.7 percent, while food prices increased 2.4 percent. A category dubbed “finished consumer foods, crude” was up 13.5 percent.

    A measure deemed to be an alternative to business investments, orders for capital goods that are not defense-related excluding aircraft, was revised upwards by three-tenths of one percentage point to reveal an increase of 1.3 percent in March


    Please enter your comment!
    Please enter your name here