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06/27/2022

Despite Rising Interest Rates, U.S. Manufacturing Shows Resilience

New orders for capital goods and shipments increased solidly in May

New orders for U.S.-made capital goods and shipments increased solidly in May, pointing to sustained strength in business spending on equipment in the second quarter, but rising interest rates and tighter financial conditions could slow momentum.

The nearly broad rise in orders reported by the Commerce Department on Monday occurred despite deteriorating business and consumer sentiment as well as heightened fears of a recession. The gains partly reflected higher prices. The Federal Reserve is aggressively tightening monetary policy to quell inflation.

"There's some inflation behind the increase in orders, but, nevertheless, there are a lot of dollars flowing through the economy right now," said Christopher Rupkey, chief economist at FWDBONDS in New York. "Businesses would not order new equipment if they thought consumers and other companies were looking to pull back their purchases."

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