U.S. Factory Orders Take a Sharp (but Temporary) Dip in March

aircraft factoryBy CHRISTOPHER S. RUGABER, AP Economics Writer

Demand for U.S. factory goods dropped by the most in three years in March, driven lower by a sharp fall in volatile orders for commercial aircraft. Still, more recent data suggest the decline may be temporary.

The Commerce Department said Wednesday that orders for factory goods fell 1.5%, the steepest decline since March 2009, when the economy was mired in recession. Orders rose 1.1% in February.

A key reason for the drop was aircraft orders plummeted nearly 50%. The category can fluctuate sharply from month to month.

Excluding transportation goods, orders were unchanged. Demand for less durable items, such as food, chemicals and gasoline, rose 0.5%.

"Despite this month's decline, new orders have been on a rising trend," Steven Wood, an economist at Insight Economics, said in a note to clients. "The demand for manufactured goods is recovering moderately and irregularly."

Factory orders have rebounded after plummeting during the recession. Orders in March totaled $460.5 billion, 37% higher than the recession's low point reached three years ago. That's still 4.2% below the peak reached in December 2007, the month the recession began.

Other data suggest the March decrease won't endure. A private survey released Tuesday found that the manufacturing activity grew in April at the fastest pace in 10 months. New orders, production and a measure of hiring all rose. The increase in new orders points to rising output in the coming months.

The April survey from the Institute for Supply Management helped the Dow Jones industrial average close Tuesday at its highest level in more than four years. It followed a series of weaker reports in recent weeks that showed hiring slowed, applications for unemployment benefits rose and factory output dropped.

There were positive signs in the government's report on March factory orders, too. Orders for so-called "core" capital goods, a measure of business investment, fell only 0.1%. That's much less than the government reported in a preliminary estimate last week.



Still, companies cut back on a variety of goods meant to last at least three years. Demand for steel and other metals, industrial machinery, and computers all dropped.

Autos and auto parts orders were unchanged in March, after big gains in January and February. That indicates auto production could slow.

Sales of cars and trucks in April were mixed. Toyota and Chrysler on Tuesday reported big U.S. sales gains for April, but those gains came at the expense of General Motors and Ford. Auto production has been solid in recent months as Americans have increased their purchases of cars and trucks, a good sign for further gains in factory output.

Businesses increased their spending on equipment and software in the first quarter at the weakest pace in three years, a report last week showed.

Many economists think orders slowed in part because an investment tax credit expired at the end of last year. Orders had jumped ahead of that expiration.

Factories account for only about 9% of total payrolls but added 13% of the new jobs created last year. Manufacturers have added 120,000 jobs in the past three months, about one-fifth of all net gains during that period.

The government reported last week that the overall economy grew at an annual rate of 2.2% in the January-March period. While that was down from growth of 3% in the final three months of last year, it was an improvement over the 1.7% economic growth turned in for all 2011.

Economists believe increased hiring will help support stronger gains in incomes this year, which will provide support for consumer spending. This should result in a slightly better economic performance this year with growth coming in around 2% to 2.5%.

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cza2129

Well if a government agency SAYS it's temporary....it MUST be true. LMAO.

June 12 2012 at 1:54 PM Report abuse rate up rate down Reply
cza2129

A government agency SAYS it should be temporary? OMG it MUST be true in that case. LMAO.

June 12 2012 at 1:53 PM Report abuse rate up rate down Reply
john&jan

our country is still in a deep hole and it will be for along time yet,all this bs is just that bs.we have bad leaders in our country who know nothing of how to change it. those leaders do not suffer,we the people do.sad,but true.

May 03 2012 at 6:11 AM Report abuse +2 rate up rate down Reply
ken herman

Ever wonder why Obama's reelection campaign is not using the hope and change slogan again? Could be because there hasn't been any. Now it's "we haven't done anything to help the economy and actually made it sink lower but the other side is worse so vote for us" This has to be the biggest polititacal joke of all time.

May 02 2012 at 10:21 PM Report abuse +5 rate up rate down Reply
Mike

Being shut out from HP comments isn't a bad thing, they are in cardiac arrest trying to make the economy and the Bamster look decent.

May 02 2012 at 9:14 PM Report abuse +6 rate up rate down Reply
boxigg

I'M SURE WE WON'T SEE THIS STORY ON HUFFINGTON B.S WEBSITE

May 02 2012 at 8:12 PM Report abuse +4 rate up rate down Reply
xiaogermaine8

The most in three years!!! The Sharpest downturn in three years is not temporary it happened. Love how a record that has already happened is called temporary. Must be Climate Change huh. Nothing to do with a failed stimulus? Good Job Obama.

May 02 2012 at 8:08 PM Report abuse +8 rate up rate down Reply
sheriff508

WOW- sure glad to know that April will be better than March!!! LOL. These folks have NEVER got it right--- why start now???
"Other data suggest the March decrease won't endure. A private survey released Tuesday found that the manufacturing activity grew in April at the fastest pace in 10 months. New orders, production and a measure of hiring all rose. The increase in new orders points to rising output in the coming months."

May 02 2012 at 8:07 PM Report abuse -4 rate up rate down Reply
cpogordon

I love how AOL says the news on HP isn't bias:)

May 02 2012 at 6:58 PM Report abuse +8 rate up rate down Reply
democracks0

Hope and Change was just one of many lies told.

May 02 2012 at 6:58 PM Report abuse +9 rate up rate down Reply
1 reply to democracks0's comment
democracks0

No hope and short changed is more like it.

May 02 2012 at 6:59 PM Report abuse +9 rate up rate down Reply