US Economy

US factory orders post largest increase in 7 months

Key Points
  • New orders for U.S.-made goods rose by the most in seven months in March amid strong demand for transportation equipment, but rising inventories and a marginal rebound in unfilled orders pointed to slower manufacturing activity.
  • Factory goods orders rebounded 1.9%, also boosted by orders for computers and electronic products.
  • Economists polled by Reuters had forecast factory orders would rise 1.5% in March. Factory orders increased 1.7% compared to March 2018.
A worker assembles components on a diesel engine at the Cummins Seymour Engine Plant in Seymour, Indiana, Jan. 29, 2019.
Luke Sharrett | Bloomberg | Getty Images

New orders for U.S.-made goods rose by the most in seven months in March amid strong demand for transportation equipment, but rising inventories and a marginal rebound in unfilled orders pointed to slower manufacturing activity.

Factory goods orders rebounded 1.9%, also boosted by orders for computers and electronic products, the Commerce Department said on Thursday. That was the largest rise since August 2018. Data for February was revised up to show factory orders slipping 0.3% instead of falling 0.5% as previously reported.

Economists polled by Reuters had forecast factory orders would rise 1.5% in March. Factory orders increased 1.7% compared to March 2018.

Inventories at factories increased 0.4% in March. The stock of unsold goods has increased in 28 of the last 29 months. Unfilled others at factories rose 0.2% in March after falling 0.2% in February.

Manufacturing, which accounts for about 12% of the economy, is being pressured by sluggish global demand, continued uncertainty over trade talks between the United States and China, and a large inventory build. Fading depreciation provisions for capital equipment as a result of the Trump administration's tax restructuring has also slowed business investment, further squeezing manufacturing.

A survey on Wednesday showed a measure of national factory activity fell to a 2½-year low in April.

In March, orders for machinery edged up 0.1% after falling 0.9% in the prior month. Orders for electrical equipment, appliances and components rose 0.5% while those for computers and electronic products jumped 2.2%.

Transportation equipment orders surged 7.0% in March after falling 2.9% in the prior month. Orders for civilian aircraft and parts soared 31.0%. Motor vehicles and parts orders increased 1.5%.

The Commerce Department also said March orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 1.4% instead of the 1.3%  jump reported last week.

Orders for these so-called core capital goods were unchanged in February. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, were unchanged in March rather than slipping 0.2% as previously reported.

Core capital goods shipments rose 0.3% in February. Business spending on equipment spending stalled in the first quarter.

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Key Points
  • U.S. worker productivity increased at its fastest pace in more than four years in the first quarter.
  • The rapid pace depressed labor costs and suggested inflation could remain benign for a while.
  • Nonfarm productivity increased at a 3.6% annualized rate in the last quarter, the Labor Department said.