WASHINGTON – Orders for long-lasting U.S. factory goods fell sharply last month, dragged lower by a steep drop in volatile commercial aircraft demand. But orders that reflect business investment plans rose slightly.
The Commerce Department said Wednesday that orders for durable goods declined 5.7 percent in March, after a 4.3 percent gain the previous month. February’s figure was revised lower.
Durable goods are items expected to last at least three years. Orders tend to fluctuate sharply from month to month.
The steep March decline was exacerbated by a 48.2 percent fall in commercial aircraft orders. Still, even excluding aircraft and transportations demand, orders dropped 1.4 percent, the second straight decline.
One positive sign in the report: so-called core capital goods, which include machinery and equipment, ticked up 0.2 percent. Economists pay close attention to these orders because they strip out defense and aircraft orders and are a good measure of companies’ expansion plans.
The slight increase in core capital goods followed a sharp drop in February. Still, economists expect business investment contributed to economic growth in the January-March quarter.
The economy likely grew at a healthy 3.1 percent annual rate in the first quarter, up from only a 0.4 percent rate in the fourth quarter. The Commerce Department will release its first estimate for January-March growth on Friday.
But many economists expect growth has begun to slow to a rate of 2 percent or less in the current April-June quarter.
One reason is Social Security taxes have reduced Americans’ take-home pay this year. That’s starting to limit their spending power.
Also, across-the-board government spending cuts that began March 1 will likely weigh on growth, including manufacturing.
Some reports suggest that manufacturing has already started to weaken after showing signs of strength over the winter. Strong auto production hasn’t been enough to offset broader slowdowns in other industries.
Factory output slipped in March, according to a Federal Reserve report last week. And a survey of purchasing managers earlier this month found that manufacturing expanded at a slower pace in March compared with February. The Institute for Supply Management’s survey showed that new orders and production declined sharply.