US durable goods report shows decline in production

US  durable goods report shows decline in production, but employment’s fine. According to a new survey carried out in the US, the factory activities are expanding at a lower rate than expected in June. The survey also revealed that the employment rates were stable. Markit, which is a data provider, compiled the US flash purchasing manager’s index. They said that the index had slowed to 53.4 in June from last month’s 54.0. However, a reading above 50 also states that there has been expansion which is something good. Markit said,” Softer output growth was a principal factor behind the decline in the headline index during June.”

Image: fxtimes.com

The fall of the index came as a surprise to the Economists who were surveyed by the Wall Street Journal. In the survey the Economists had predicted that the index would hold the reading at 54.0. The report of Markit on factories was followed by another weak report on durable goods from the Commerce Department that showed new orders fell 1.8 percent in May, making it the third decline in four months. This decline was also followed by a decline in the headline index during June. This decline in May was the first one in two years.

The month of May was quite hard on many sectors as many of them saw considerable decline. However, the decline was not seen in the demand of new orders. The domestic demand had increased a little bit but some manufacturers also noted a sharp decline in spending by the energy sector. Amidst all the bad news about decline, the only positive seems to be that of job creation. The report said that job creation in June accelerated to its fastest pace since November 2014. However, the final numbers will be compiled and released on July 1st for the month of June.

Despite the decline in goods the value of dollar has been stable and remained the currency of choice. It also seems the June numbers did not affect many investors. Yes, there was drop, but the US dollar is touching highs regularly. A good example could be of the trade happening in USD-JPY. Many of the top firms like Barclays, JPMorgan Chase have shown faith in the economy and its ability to bounce back.