Off The Wire
U.S. factory orders post record decline in March
WASHINGTON (Reuters) - New orders for U.S.-made goods suffered a record decline in March and could sink further as disruptions from the novel coronavirus fracture supply chains and depress exports.
The Commerce Department said on Monday factory orders dropped 10.3%, the largest decrease since the series started in 1992. Data for February was revised down to show orders dipping 0.1% instead of being unchanged as previously reported.
Economists polled by Reuters had forecast factory orders would tumble 9.7% in March. Factory orders decreased 2.8% year-on-year in March. Unfilled orders at factories dropped 2.0% in March after nudging up 0.1% in the prior month.
Inventories at factories fell 0.8% in March after declining 0.4% in February. Shipments of manufactured goods decreased 5.2% in March after slipping 0.3% in the prior month.
Manufacturing, which accounts for 11% of U.S. economic activity, is, together with the rest of the economy, reeling from nationwide lockdowns to slow the spread of COVID-19, the respiratory illness caused by the virus.
The Institute for Supply Management (ISM) reported on Friday that its measure of national factory activity dropped to an 11-month low in April. The ISM’s forward-looking new orders sub-index plumbed to levels last seen in December 2008.
Manufacturing was already under pressure from the Trump administration’s trade war with China. Manufacturing output declined in the first quarter at its sharpest pace in 11 years. Business investment has contracted for four straight quarters.
The longest economic expansion in U.S. history ended in the first quarter, with gross domestic product declining at its steepest pace since the 2007-2009 Great Recession.
TRANSPORTATION ORDERS SINK
Though some parts of the country have started reopening, economists say it would take at least two years to bring the economy back to pre-coronavirus levels. They expect a wave of bankruptcies and a long period of high unemployment.
At least 30 million Americans have filed claims for unemployment benefits since mid-March when state and local government ordered nonessential workers to stay at home to slow the spread of COVID-19.
In March, transportation equipment orders plunged 41.3% after increasing 4.6% in the prior month. Orders were weighed down by a 296.2% dive in demand for civilian aircraft and parts. Though Boeing (BA.N) said its aircraft orders rose in March relative to February, it also reported big cancellations of its troubled 737 MAX jetliner, which has been grounded since March 2019 following two fatal crashes.
There was a 65.3% decline in orders for ships and boats in March. Motor vehicle and parts orders dropped 6.7% in March. That offset a 63.7% surge in orders for defense aircraft and parts. Machinery orders fell 0.5% in March after decreasing 1.1% in February. But orders for electrical equipment, appliances and components orders increased 0.8% in March.
The government also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, dipped 0.1% in March instead of edging up 0.1% as reported last month.
Shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, fell 0.2% in March as previously reported.
Reporting by Lucia Mutikani, Editing by Franklin Paul and Paul Simao