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    US Factory Orders Beat Forecast, Revisions Weaker


    Orders to U.S. factories rose in March for the first time in eight months, but the transportation sector aside, the underlying environment remains weak and the negative revision to February's orders could impact first quarter GDP.

    After last year’s poor January factory number, orders then rebounded strongly in February and March rising a total of 3 percent and hinting at the time, that the economy would stage a strong recovery in the second quarter.

    In the event GDP last year grew at a 4.6 percent annual rate in the second quarter and 5.0 percent in the third, a huge expansion from the 2.2 percent fall in first three months and the best half-year since mid-2003. So far this year the February and March total is a modest 2.0 percent, two-thirds of last year’s increase.

    New placements for manufactured goods rose 2.1 percent, the largest and only gain since last July following a revised 0.1 percent drop in February initially reported at 0.2 percent, according to the Commerce Department today in Washington, D.C. Economists in the Reuters survey had forecast a gain of 2.1 percent.

    Over the year orders were 4.0 percent lower, slightly  better thant -4.3 percent drop in February. Annual orders have declined for five straight months.  

    Orders excluding the transportation sector, in practice largely the civilian aircraft orders for the Boeing Company of Chicago, were flat in March but the prior month saw a large negative recalculation, dropping the original 0.8 percent gain down to 0.1 percent. Overall, transportation orders rose 13.5 percent and bookings for non-defense aircraft and parts climbed 30.5 percent. Boeing recieved orders for 39 new planes.

    Machinery orders rose 1.4 percent, computers and electronic products added 7.2 percent and electrical equipment, appliances and components fell 0.9 percent. Orders without defense procurement rose 1.3 percent after Februarys 0.1 percent increase. 

    Manufacturing industries account for about 12 percent of U.S. economy and are considered a leading indicator for the economy as a whole because of the long lead times for expanding or contracting production. This sector may be suffering some effects from the rise in the value of the U.S. currency on world markets.  

    In addition, the expected surge in American consumer spending that had been anticipated from the collapse in oil and gasoline prices has not materialized. Americans have largely choosen to save their extra disposable income rather than head to the stores. 

    The dollar has gained about 12 percent in trade weighted terms since June on expectation that the Federal Reserve would begin to increase the Fed Funds rates for the first time in eight years and the European Central Bank’s, anticipated and now enacted, quantitative easing program. 

    Orders for non-defense capital goods excluding aircraft in March, an oft watched indicator of business confidence and spending, were revised up to 0.1 percent replacing the 0.5 percent drop originally reported last month as part of the durable goods survey, according to the Commerce Department. .

    Shipments of these same non-defense capital goods excluding aircraft, part of the business equipment spending calculation in gross domestic product, declined 0.4 percent as previously reported.


    Joseph Trevisani

    Chief Market Strategist

    WorldWideMarkets Online Trading

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