La Jornada – Increase in US factory orders beat expectations in March

Washington. New orders for US-made goods rose more than expected in March and shipments grew strongly, but supply restrictions following renewed COVID-19 lockdowns in China could dampen manufacturing activity in the coming months.

The Commerce Department said on Tuesday factory orders rose 2.2 percent in March after rising 0.1 percent in February. Economists polled by Reuters had expected factory orders to rise 1.1 percent.

The manufacturing sector – which accounts for 12 percent of the US economy – is facing some short-term headwinds due to China’s zero-tolerance policy on the coronavirus, which is causing disruptions to supply chains.

A survey showed that the national indicator of manufacturing activity from the Institute of Supply and Management (ISM, for its English acronym) fell for the second month in a row in April. ISM said some manufacturers are concerned about “the ability of their Asian partners to make reliable deliveries in the summer months”.

The increase in factory orders in March was across the board. Auto and parts orders rebounded 3.0 percent, indicating improved global semiconductor supply. The Federal Reserve reported last month that auto assembly rose in March to a 14-month high.

There were increases in orders for machinery, primary metals, electrical equipment, appliances, and components. Demands for computers and electronic products, as well as those for manufactured metal products, also rose.

Shipments of manufactured goods rose 2.3 percent after rising 1.1 percent in February. Factory inventories grew 1.3 percent. Backlog increased 0.4 percent after rising 0.5 percent in the previous month.

The Commerce Department also reported that orders for non-defense capital goods excluding aircraft, which are seen as a gauge of companies’ spending plans on equipment, rose 1.3 percent instead of 1.0 percent last month.

Shipments of so-called core capital goods, which are used to calculate business equipment spending in the GDP report, rose 0.4 percent in March, instead of the previously reported 0.2 percent.

Strong business spending on equipment helped support domestic demand in the first quarter, even as gross domestic product shrank at an annualized rate of 1.4 percent during that period.