Northwest Arkansas Democrat-Gazette
U.S. FACTORY orders plunge 14.4% in March.
March report notes sharpest drop for commercial aircraft
WASHINGTON — Orders for big-ticket manufactured goods plunged 14.4% in March, the second-biggest decline on record. The worse-than-expected slide underscored the severity of the economic impact from the coronavirus pandemic.
New orders for commercial aircraft went negative as cancellations outpaced sales. Those orders plunged 295.7% with skies largely empty of planes. The last time so few people traveled by plane was in the pre-jet era.
The March decline was surpassed only by an 18.4% drop in August 2014. There was a 1.1% gain in February, before the government-mandated shutdowns to contain the virus had begun. Demand in a key category that serves as a proxy for business investment eked out a 0.1% gain, but that followed a 0.8% decline in February.
The report Friday from the Commerce Department showed widespread weakness, with demand for transportation products falling 41%.
Orders for most types of durable goods declined in March, including motor vehicles and metals. By far the sharpest drop was in civilian aircraft, which recorded negative orders of $16.3 billion, or a drop pegged at close to 300% from the previous month, likely reflecting canceled orders and accounting changes for Boeing planes.
Shipments of core capital goods, a proxy for equipment investment in the government’s gross domestic product report, fell 0.2% after declining 0.9% in February. The Commerce Department’s initial estimate of first quarter gross domestic product, scheduled for next week, is projected to show the fastest rate of contraction since 2009 amid widespread business closures and stay-at-home directives, all but confirming the record-long U.S. expansion is over.
The drop in business investment is likely to extend through the second quarter, as most places remain closed,
fewer people shop and factory output declines. Oil and gas producers, meanwhile, are cutting back on capital spending as the price collapse makes it unprofitable to drill.
The dire numbers from the Commerce Department followed a report showing that manufacturing production collapsed in March, with declines that have not been seen since the country demobilized after World War II. And worse is on the way. The numbers from March capture only the beginning of the lockdown in mid-March. When April manufacturing numbers are released next month, the full force of the pandemic will be on display.
“We expect the coronavirus will deal a severe blow to U.S. business spending via suppressed global and domestic demand, broken supply chains, depressed oil prices, tighter financial conditions and elevated uncertainty,” said Gregory Daco, chief economist at Oxford Economics.
“This will translate into some of the largest pullbacks in capital spending of all time,” Daco said. Information for this article was contributed by Martin Crutsinger of The Associated Press and by Katia Dmitrieva of Bloomberg News.