Orders to U.S. factories rose 0.4% to US$320.58 billion in May, the Commerce Department said Wednesday.

The May increase followed a revised 3% fall in April, previously estimated as a 2.9% drop. Analysts had expected May orders to be flat.

RBC Financial said that inventories declined by 0.1%, bringing the inventory-to-shipments ratio down a tick to 1.34 times. “Overall, this is positive news that contributes towards a brighter emerging outlook for the U.S. manufacturing sector,” it says.

Yesterday, the Institute for Supply Management manufacturing index for June came in at 49.8, failing to get above the 50 mark, which would signal expansionary conditions in the U.S. manufacturing sector. “However, the details in the report were much more encouraging since a steep decline in the inventories sub-index was the only major factor holding things back,” says RBC. “Encouragingly, new manufacturing orders and production have both been rising for two months now.”

RBC says that the ISM employment subindex also remained below 50, signaling that employment in the sector continues to decline. “But, having risen to a reading of 46.2 from 43.0 the previous month, indicates a significant slowing in the pace of manufacturing employment contraction,” it says. “This coincides with yesterday’s release of the Challenger Report which indicated that total layoffs in June were at their lowest reading since the fall of 2000.”