Orders for long-lasting U.S. manufactured goods rebounded far less than expected in March as demand for automobiles, computers and electrical goods slumped, suggesting the downturn in the factory sector was far from over.
Tuesday’s report from the Commerce Department also implied that business spending and economic growth were weak in the first quarter. Prospects for the second quarter darkened after another report showed an ebb in consumer confidence in April.
The data came as Federal Reserve officials started a two-day policy meeting. The U.S. central bank is expected to leave its benchmark overnight interest rate unchanged on Wednesday. The Fed raised rates in December for the first time in nearly a decade.
“These disappointing reports will likely add to the caution at the Fed. Given the weak performance in these two key segments of the economy, we expect the rebound in growth momentum in the second quarter to be quite weak,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
The Commerce Department said orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, increased 0.8 percent last month after declining 3.1 percent in February.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged after a downwardly revised 2.7 percent decrease in the prior month. These so-called core capital goods orders were previously reported to have decreased 2.5 percent in February. Economists had forecast durable goods orders advancing 1.8 percent last month and core capital goods increasing 0.8 percent. Shipments of core capital goods – used to calculate equipment spending in the gross domestic product report – rose 0.3 percent after slumping 1.8 percent in February.
Manufacturing, which accounts for 12 percent of the U.S. economy, is struggling with the lingering effects of the dollar’s past surge and sluggish overseas demand.
Factories also have been hurt by deep spending cuts on capital projects by oilfield service firms like Schlumberger (SLB.N) and Halliburton (HAL.N) as well as efforts by businesses to sell a stockpile of unwanted inventory.
These drags have rippled through the economy, undercutting export growth, business investment and profits.