U.S. factory orders tick up in March

May 4, 2017 – Orders to U.S. factories turned in the weakest performance in four months, although a key category that tracks business investment showed more strength.

Factory orders edged up just 0.2 per cent in March, a significant slowdown from February’s gain of 1.2 per cent. It was also the poorest showing since orders fell 2.3 per cent in November, the Commerce Department reported Thursday.

Despite the overall decline, a key category that tracks business investment rebounded to a 0.5 per cent gain. That is the best showing since December’s 0.8 per cent increase. The business category increased a small 0.1 per cent in February.

American manufacturers continue to rebound from a rough patch over the last two years when demand for American exports fell due to weak overseas economies and the strong U.S. dollar. The latest report reflects a recovery in U.S. exports, as the dollar has stabilized and major overseas markets have posted stronger growth.

The 0.2 per cent overall increase included a 0.9 per cent gain in durable goods, which was slightly better than the government’s initial estimate last week of a 0.7 per cent increase. However, the new report showed that demand for nondurable goods — products that range from food to paper, clothing, gas and chemicals — fell 0.5 per cent in March.

Despite this month’s modest gain, economists are still optimistic about U.S. manufacturing growth in 2017.

“In our view, manufacturing activity is set to modestly improve in the coming year and today’s data support our view,” Barclays economist Blerina Uruci said in a note to clients.

The machinery category was up 0.3 per cent, led by large gains for construction and mining and oilfield equipment.

In addition to weak exports, manufacturing activity had been hurt by a steep plunge in energy prices, which led to sharp cutbacks by energy companies in exploration and drilling. With energy prices generally rising over the past year, demand for oilfield equipment has increased.

In March the demand for commercial aircraft rose 7 per cent, after much larger gains the previous two months. Orders for military aircraft were up an even sharper 31 per cent.