Factory orders slacken

Orders to U.S. factories turned in their slowest performance in three months in May as a surge in demand for commercial aircraft failed to offset weakness in autos, heavy machinery and steel.

Factory orders rose 0.6% in May, less than half the gains turned in during April and March, the Commerce Department reported Wednesday. It was the poorest showing since a 0.4% fall in factory orders in February.

Analysts said the figures for the last three months have been inflated by big increases in the cost of refined petroleum and related products such as chemicals, which have been soaring because of rising global oil prices.

Oil hit a new record on Wednesday, climbing past $144 a barrel. Global Insight, an economic forecasting firm, said it was boosting its view of how high oil will go this year, predicting that West Texas Intermediate crude will hit $160 a barrel in December, up from the previous forecast that oil would close out the year at $124.

The orders report showed that demand for durable goods, items that are expected to last at least three years, were flat in May while demand for nondurable goods, products such as food and petroleum, rose by 1.2 %.

Transportation orders rose by 2.5%, reflecting a big 10.3% surge in demand for commercial aircraft. That helped offset a 1.6% drop in demand for motor vehicles. Automakers have been battered by soaring gasoline prices, which have cut into the market for once-popular trucks and sport utility vehicles. Ford Motor Co., General Motors Corp. and Chrysler all reported big declines in June sales.

The factory orders report showed that demand for machinery was down 5% in May, reflecting big decreases in orders for construction, industrial and mining equipment. Orders for primary metals, including steel, were off by 2%, but orders for electronic products rose by 2.9%.

Also Wednesday, a private survey based on payroll data showed that U.S. companies cut an estimated 79,000 jobs in June. The decrease was larger than forecast and followed a revised gain of 25,000 for the prior month that was less than previously estimated, the report from ADP Employer Services showed. Last month’s drop was the largest reported by ADP since November 2002.

The biggest housing recession in a quarter of a century and record oil prices are prompting an increase in firings as companies brace for falling demand. Today, the Labor Department may report that total private and government payrolls fell in June, the sixth decline this year, according to the median forecast in a Bloomberg News survey.

The Labor report may show the U.S. economy lost 60,000 total jobs in June, according to the median estimate of 79 economists surveyed.