Orders for Manufactured Goods Fell 2.1% in April

  • Orders for Manufactured Goods Fell 2.1% in April

Orders for Manufactured Goods Fell 2.1% in April

Orders for durable goods-products created to last at least three years, such as cars and appliances-fell 2.1% from the prior month to a seasonally adjusted $248.4 billion in April, the Commerce Department said Friday. Orders for computers and electronic products fell 0.4%. Friday's report followed data this month showing weak retail sales, industrial production and home sales that prompted economists to slash GDP growth forecasts for the second quarter.

"We had previously expected the next move from the Fed would be a hike, albeit at the very end of our forecast horizon in late 2020", said Michael Feroli, an economist at JPMorgan in NY.

Feroli also noted that Friday's report covered April, which was before Trump hiked tariffs on $200 billion in Chinese goods to 25 percent.

Economists polled by Reuters had forecast core capital goods orders falling 0.3% in April. Goldman Sachs is down to 1.3% from 1.5%.

The government estimated last month that the economy expanded at a 3.2% pace in the first quarter. That figure was boosted by one-time factors, such as a large increase in goods held on store shelves and in warehouses.

The headline number this morning showed a pretty severe decline, but it was largely expected given the surge in aircraft orders in March. Boeing's move to cut production of its troubled 737 MAX aircraft is also hurting manufacturing.

What happened: The big drop in orders last month was mostly tied to a drop-off in bookings for Boeing jetliners.

Yet a key measure of business investment known as core capital-goods orders also declined. Demand for communications equipment and steel, aluminum and other metals fell, while orders for machinery barely rose.

The data suggest companies are spending less on big-ticket items, in part because of the trade war.

Activity is also being weighed down by an escalation in the trade war between the United States and China, which has sparked a sell-off on Wall Street, as well as tepid global growth.

Manufacturing output has weakened in the previous year, held back by trade tensions and slower global growth.

April was flat compared to the same month last year, whereas a year ago, the 12-month change was as high as nine percent, he said.

The renewed trade tensions between Washington and Beijing have roiled the USA stock market. This is the latest in a series of disappointing releases from manufacturing, and raises some questions about the health of one of the key drivers of freight demand given recent developments in trade policy.