Orders placed with U.S. factories fell more than forecast in March as a cooling economy slowed demand for metals, mining equipment and military goods.
The 4 percent drop in bookings was the biggest since August and followed a revised 1.9 percent gain the prior month that was smaller than previously estimated, the Commerce Department reported today in Washington. The median forecast of 58 economists in a Bloomberg survey predicted orders would fall by 2.9 percent.
Companies are feeling the effects of slowing growth in Europe, Asia and the U.S., where higher taxes and across-the-board federal budget cuts, known as sequestration, have restrained consumer spending. Orders could pick up as manufacturers prepare for improved demand expected in the second half of the year as employment strengthens.
“We do expect manufacturing to bounce back in the second half as the fiscal headwinds fade and global demand starts to regain its footing,” Bricklin Dwyer, an economist at BNP Paribas in New York, said before the report. “It’s a soft patch reflecting the impact of fiscal tightening and weak overseas markets.”
Estimates in the Bloomberg survey ranged from a drop of 4.5 percent to a 0.2 percent gain. The Commerce Department revised February’s figure from a previously reported 3 percent increase.
Employment picked up more than forecast in April and the jobless rate unexpectedly declined to a four-year low of 7.5 percent, figures from the Labor Department also showed today.
Payrolls expanded by 165,000 workers last month following a revised 138,000 increase in March that was larger than first estimated, Labor Department figures showed today in Washington. The median forecast of 90 economists surveyed by Bloomberg projected a 140,000 gain. Revisions added a total of 114,000 jobs to the employment count in February and March.
Today’s Commerce Department data follow a report earlier this week that showed manufacturing slowing as the need to rebuild inventories wanes and budget cuts take hold. The Institute for Supply Management’s factory index fell to 50.7 in April from 51.3, the group reported May 1. A reading of 50 is the dividing line between growth and contraction.
Bookings for durable goods, which make up slightly more than half of total factory demand, fell 5.8 percent in March, the most in seven months, as commercial aircraft demand fell, today’s report showed. That was little changed from the 5.7 percent decrease the Commerce Department reported last week. Durable goods are items meant to last three years or more.
Commercial aircraft orders, which are often volatile, slumped 48.3 percent after jumping 86.4 percent in February. Last month, Chicago-based Boeing Co. said it had received orders for 39 aircraft in March, down from 179 the month before.
In today’s report, factory orders excluding transportation equipment declined 2 percent in March after a 0.7 percent decrease in February.
Orders for non-durable goods including petroleum and food decreased 2.4 percent, today’s report showed. Because those bookings aren’t adjusted for inflation they can reflect changes in prices rather than shifts in demand.
Bookings for capital goods excluding aircraft and military equipment, an indicator of future business investment, rose 0.9 percent in March after plunging 4.8 percent the prior month.
Shipments of those goods, a measure used in calculating gross domestic product, climbed 0.5 percent after a 1.8 percent increase the previous month. Those readings are stronger than the 0.3 percent and 1.2 percent reported in last week’s durable goods report, indicating first-quarter business investment may be revised up a bit.
Spending on equipment and software climbed at a 3 percent annualized rate from January through March after rising at an 11.8 percent pace in the previous three months, the Commerce Department’s report on gross domestic product showed last week.
Today’s figures on factory orders showed bookings for primary metals fell 3.2 percent in March. Demand dropped 31.3 percent for mining equipment and 6.8 percent for military aircraft.