New orders for U.S.-made goods unexpectedly rose in May, pointing to a strengthening manufacturing sector, but business spending on equipment appeared to have slowed further in the second quarter.

Manufacturing is being boosted by strong domestic and global demand, but growing shortages of workers as well as import tariffs are starting to strain the supply chain.

The Trump administration has imposed tariffs on a range of imported goods, including steel and aluminum, to protect domestic industries from what it says is unfair competition from foreign manufacturers. Major trade partners, including China, Canada, Mexico and the European Union, have retaliated with their own tariffs, raising the specter of a trade war.

Factory goods orders increased 0.4% amid strong demand for machinery, the Commerce Department said on Tuesday. Data for April was revised up to show orders falling 0.4% instead of the previously reported 0.8% decrease.

The market had forecast that factory orders would be unchanged in May. Orders increased 8.7% on a year-on-year basis in May.

In May, orders for transportation equipment fell 1.1%, weighed down by a 7.0% plunge in the volatile orders for civilian aircraft. Transportation orders declined 6.1% in April. Motor vehicle orders rose 0.3% in May.

Orders for machinery increased 1.2%, extending April's 1.7% surge. That reflected an 8.9% jump in orders for industrial machinery, which eclipsed a 3.9% drop in demand for mining, oil field and gas field machinery.

Orders for primary metals and fabricated metal products declined as did those for electrical equipment, appliances and components, and computers and electronic products.

Pointing to sustained strength in manufacturing, unfilled orders at factories increased 0.5% in May while inventories rose 0.2%. Unfilled orders have risen in six of the last seven months. The unfilled orders-to-shipments ratio fell to 6.68 in May from 6.73 in April. The inventories-to-shipments ratio was unchanged at 1.35.

The Commerce Department also said orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, rose 0.3% in May instead of falling 0.2% as reported last month. Orders for these so-called core capital goods jumped 2.0% in April.

Shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, rose 0.2% in May instead of dipping 0.1% as reported last month. Core capital goods shipments increased 0.8% in April.

Business spending on equipment likely moderated further in the second quarter after growing at a 5.8% annualized rate in the January-March period. It recorded double-digit growth in the second half of 2017. is an independent macroeconomic consultancy with thousands of subscribers all over the world. We provide fundamental research to help our clients make better investing decisions. Our subscribers should expect to get access to:

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