July 6, 2015 10:14 AM, EDT

Factory Orders Fall on Weak Demand for Transportation Equipment

Luke Sharrett/Bloomberg News

New orders for U.S. factory goods fell more than expected in May on weak demand for transportation and electrical equipment, a sign that manufacturing remained mired in a soft patch.

The Commerce Department said July 2 new orders for manufactured goods dropped 1.0% after a revised 0.7% decline in April.

Factory orders have dropped in nine of the past10 months.

Economists had forecast orders falling 0.5% in May after April's previously reported 0.4% drop.

Excluding the volatile transport component, orders nudged up 0.1% in May, reversing April's 0.1% decline.

Manufacturing, which accounts for about 12% of the U.S. economy, is struggling with the lingering effects of a strong dollar and lower crude oil prices, which has squeezed profits of multinational corporations and oil-field firms.

There are signs, however, the sector is starting to stabilize. A report July 1 showed the Institute for Supply Management's national factory activity index rose to a five-month high in June. A sub-index of new orders increased for a third straight month.

In addition, the rout in the energy sector looks close to running it course as crude oil prices recover after falling nearly 60% from June last year to March. Energy firms pulled only three rigs from U.S. oil fields last week, the smallest number in five weeks.

The Commerce Department report showed orders for transportation equipment tumbled 6.5% in May. Orders for electrical equipment, appliances and components fell 2.8%.

The department also said orders for nondefense capital goods excluding aircraft — seen as a measure of business confidence and spending plans — fell 0.4% instead of the 0.4% gain reported last month.

It was the second straight month of decline in these so-called core capital goods.

Shipments of core capital goods, used to calculate business equipment spending in the gross domestic product report, were revised down to show a 0.1% dip in May instead of the previously reported 0.3% rise.