US Factory Orders Post Highest Climb in 9 Months

US factory orders posted its biggest growth in 9 months for the month of July, after being heavily boosted by a major growth in the demand for commercial air crafts. The very significant measure of business investment plans reported its biggest increase since January.

The Commerce department on Friday reported a 1.9% growth in Factory orders for the month of July. This was the largest 1 month gain since October last year. The gain was led by a surge in orders in the volatile category of commercial aircraft. In the category which serves as a proxy for business related investments, orders rose by 1.5%, the best performance since January.

The department also reported a 1.5% increase in non-defence capital goods which do not include aircraft for the month of July after it posted a 1.6% gain in the previous month. These core capital goods are mostly seen as a measure of business confidence and plans for equipment expenditure.

Shipments of core capital goods which are an integral component of the gross domestic product report dropped by 0.5% in the month of July. They had previously reported a 0.4% drop in July.

Many economists had earlier projected that after a period of weakness there will be a rally in business investment for the second half of 2016. The demand for oil field equipment had previously grown for a third month in support of that projection.

The oil field and mining machinery category rose by 45.6% for the month of July, but despite a stellar performance in the last 3 months which it posted strong gains, total orders in this category are almost 60% lower in the first 7 months of this year when compared with last year's performance.

There was a major slowdown in exploration and drilling activities in the energy sector in response to the heavy slump in crude oil prices, but the sector is now starting to stabilise. A collapse in oil drilling activity following a plunge in oil prices has also squeezed manufacturing by undermining business spending, leading to weak demand for heavy machinery. In addition, a U.S. inventory correction has resulted in factories receiving fewer orders.

In the moments after the release, the EURUSD was trading lower at 1.1202 from around 1.1198 seen before the data was released, GBPUSD had edged higher to trade at 1.3348 from a previous 1.3333, while USDJPY was at 103.66 compared to 103.64 earlier. The US dollar index, which tracks the greenback against a basket of six major rivals, was at 95.53 compared to 95.55 previously. U.S. stock markets however traded higher after the open. The Dow 30 climbed 0.57%, the S&P 500 gained 0.57%, while the Nasdaq Composite traded 0.65% higher. Elsewhere, in the commodities market,gold futures traded at $1,327.95 a troy ounce, compared to $1,328.10 ahead of the data, while crude oil traded at $44.18 a barrel from $44.27 earlier.