WASHINGTON (AP) — Orders for long-lasting factory goods fell in March by the most in seven months. The drop reflected a steep decline in commercial aircraft demand and little growth in orders that signal future business investment.
The Commerce Department said on Wednesday that orders for durable goods declined 5.7 percent in March. That followed a 4.3 percent gain in February, which was revised lower.
Weaker economies overseas and the impact of across-the-board government spending cuts have made businesses more cautious, reducing demand for manufactured goods. Spending on military equipment also fell sharply last month.
Durable goods are items expected to last at least three years. Orders for durable goods tend to fluctuate sharply from month to month, and economists cautioned against reading too much into one monthly decline.
A measure of business investment plans, which include industrial machinery and computers, ticked up 0.2 percent last month. Economists pay close attention to so-called core capital goods orders because they strip out more volatile defense and aircraft orders.
Increases last month in both orders and shipments of core capital goods suggest businesses increased spending on equipment and software in the January-March quarter. That probably contributed to economic growth in the first quarter.
Still, most of the quarterly gain reflected a huge increase in January. Orders fell sharply in February and rose only slightly last month. That indicates businesses may spend less on equipment in the April-June quarter, economists said.
“This doesn’t look like we’re entering some kind of downward spiral,” said Jonathan Basile, an economist at Credit Suisse. “This seems like a downshift from stronger growth.”
The overall decline in durable goods was exacerbated by a 48.2 percent fall in commercial aircraft orders. Boeing reported that it received orders for only 39 aircraft, compared with 179 in the previous month.
Orders for military aircraft and other military goods also dropped. That most likely reflects the impact of automatic government spending cuts that began on March 1. Joseph LaVorgna, an economist at Deutsche Bank, noted that orders for defense equipment had fallen to their lowest level in over seven years.
Excluding aircraft and transportation demand, orders for durable goods dropped 1.4 percent, the second straight decline.
Demand fell in most types of goods. Orders dropped for metals like steel and aluminum, metal parts, electrical equipment and appliances and defense aircraft. Orders increased for computers and communications equipment.
Many economies overseas were also sluggish, reducing exports. China’s manufacturers grew at a slower pace in March, according to a survey released on Monday, as export orders and employment declined. Europe’s economy has been in recession.
Economists on average are projecting that the American economy grew at a healthy annual rate of about 3 percent in the first quarter, up from only a 0.4 percent rate in the fourth quarter of last year. The Commerce Department will release its first estimate for January-March growth on Friday.
But many economists say they expect growth has begun to slow to a rate of 2 percent or less in the current April-June quarter.
Article source: http://www.nytimes.com/2013/04/25/business/economy/factory-orders-dropped-steeply-in-march.html?partner=rss&emc=rss