US factory data signals further slowdown in GDP
Strong dollar, weak global demand put pressure on manufacturing
washington — New orders for US factory goods fell in February and business spending on capital goods was much weaker than initially thought, the latest indications that economic growth slowed further in the first quarter.
The Commerce Department said on Monday new orders for manufactured goods declined 1.7 per cent as demand fell broadly, reversing January’s downwardly revised 1.2 per cent increase. Orders have declined in 14 of the last 19 months. They were previously reported to have increased 1.6 per cent in January.
The report added to weak consumer spending and trade data in suggesting economic growth moderated further at the turn of the year after slowing to a 1.4 per cent annualised pace in the fourth quarter. Estimates for first-quarter gross domestic product growth are currently below a one per cent rate.
Prices of US Treasuries were trading higher after the data, while US stocks were largely unchanged. The dollar was slightly weaker against a basket of currencies.
Manufacturing, which accounts for about 12 per cent of the economy, has been pressured by a strong dollar and weak global demand, which have undermined exports of factory goods, as well as efforts by businesses to reduce an inventory overhang.
The sector has also been slammed by investment cuts by energy firms as they adjust to reduced profits from cheap oil.
But the worst of the factory slump appears to be over, with a survey last week showing manufacturing activity expanded in March for the first time in six months.
After gaining about 20 per cent versus the currencies of the United States’ main trading partners between June 2014 and December 2015, the greenback is flat on a trade-weighted basis so far this year. In addition, the slide in oil prices has slowed.
In February, factory orders fell broadly, with orders for transportation equipment tumbling 6.2 per cent. Orders for machinery dropped 3.4 per cent and bookings for electrical equipment, appliances and components decreased 3.6 per cent.
The Commerce Department also said orders for non-defense capital goods excluding aircraft — seen as a measure of business confidence and spending plans — fell by a steeper 2.5 per cent in February instead of the 1.8 per cent drop reported last month.
Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the GDP report, fell 1.7 per cent in February and not 1.1 per cent as previously reported.