US factory orders fall in May, weighed down by weak demand for commercial aircraft

• Boeing received only 27 aircraft orders in May compared to 136 in April, driving the sharp decline in commercial aircraft bookings after April's 167.4% surge
• AI spending boom drove gains in key sectors: computer and electronic product orders rose 0.2% monthly and 13.0% year-over-year, while machinery orders surged 2.1%
• Core capital goods orders (excluding aircraft), a key measure of business spending plans, rebounded 1.4% in May, indicating continued business investment despite monthly volatility

Summary: US Factory Orders Decline in May on Weak Aircraft Demand

Key Figures:

U.S. factory orders fell 1.3% in May following a revised 5.3% increase in April, according to the Commerce Department. The decline was better than the 1.8% drop economists had predicted. Year-over-year, orders rose 5.1%.

Main Drivers:

The primary drag came from commercial aircraft orders, which plummeted 51.8% after surging 167.4% in April. Boeing reported just 27 aircraft orders in May compared to 136 in April.

Positive Sectors:

Despite the headline decline, underlying demand remained robust:

• Machinery orders surged 2.1%
• Computer and electronic products orders rose 0.2% (up 13.0% year-over-year)
• Primary metals and fabricated metal products posted significant gains
• Electrical equipment orders increased 6.2% year-over-year despite a 0.3% monthly decline

Economic Context:

Manufacturing represents 9.4% of the U.S. economy and continues to benefit from AI-related investment spending, which has helped offset impacts from the U.S.-Israeli war with Iran. The ISM survey showed manufacturing expanded for a sixth consecutive month in June.

Business Investment Indicator:

Non-defense capital goods orders excluding aircraft—a key measure of business equipment spending—rebounded 1.4% in May, though slightly below the initially estimated 1.6%. Core capital goods shipments rose just 0.1%, revised down from the previously reported 0.3%.

Market Implications:

The data suggests underlying manufacturing strength persists despite headline volatility driven by lumpy aircraft orders, with AI spending providing continued support for the sector.