The factory sector had been showing life but took a step back in May as new orders fell 0.5 percent to more than reverse April's downward revised 0.4 percent gain. Orders for nondurables, which are the new data in today's report and where details are limited, fell 1.0 percent versus a 0.5 percent rise in April. Durable goods orders, which were first posted last week, are unrevised at a flat 0.1 percent gain. Core capital goods, part of last week's report, are unrevised at a sizable 0.6 percent decline for the second decline in the last three months which is a negative signal for business investment.

The bad news also includes a 0.7 percent decline in total shipments to just about reverse April's 0.8 percent gain. Both unfilled orders and inventories are slightly positive, each up 0.2 percent in the month.

Details on new orders include monthly declines for machinery of 0.5 percent, for nondefense communications equipment of 1.7 percent, and electrical equipment of 0.3 percent. All these are inputs into core capital goods. Computers and electronic products, another input, managed only a 0.1 percent gain.

Transportation details include a 0.5 percent rise for motor vehicles to extend this category's run of gains and a comparatively subdued 2.9 percent decline for commercial aircraft where monthly data are often highly volatile. Defense aircraft are a positive in the report, jumping 22.6 percent on the month.

Total new orders are up on the year, but not by much at only a nominal 1.1 percent which is below the rate of inflation. Should manufacturing stall in the second quarter, GDP success will pivot on consumer spending which, based on April and May's retail sales report, doesn't look very strong either.

Factory orders are expected to rise 0.2 percent in May versus April's 0.7 percent gain. Durable goods orders for May, which have already been released and are one of two major components of this report, edged 0.1 percent higher on the month.

Factory orders represent the dollar level of new orders for both durable and nondurable goods. This report gives more complete information than the advance durable goods report which is released one or two weeks earlier in the month.

Investors want to keep their fingers on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more moderate growth which is less likely to cause inflationary pressures. By tracking economic data like factory orders, investors will know what the economic backdrop is for these markets and their portfolios. The orders data show how busy factories will be in coming months as manufacturers work to fill those orders. This report provides insight to the demand for not only hard goods such as refrigerators and cars, but nondurables such as cigarettes and apparel. In addition to new orders, analysts monitor unfilled orders, an indicator of the backlog in production. Shipments reveal current sales. Inventories give a handle on the strength of current and future production. All in all, this report tells investors what to expect from the manufacturing sector, a major component of the economy and therefore a major influence on their investments.