U.S. factory orders rise solidly; inventories pick up

WASHINGTON, May 4 (Reuters) - - New orders for U.S. factory goods rose more than expected in March, while shipments and inventories increased after eight straight months of declines, signs that the downturn in manufacturing was nearing an end.

A Ford Motor assembly worker works on the frame of a 2015 Ford Mustang vehicle at the Ford Motor Flat Rock Assembly Plant in Flat Rock, Michigan, August 20, 2015. REUTERS/Rebecca Cook

The Commerce Department said on Wednesday new orders for manufactured goods increased 1.1 percent after February’s downwardly revised 1.9 percent decline.

Economists polled by Reuters had forecast factory orders rising 0.6 percent in March after a previously reported 1.7 percent decrease in February.

The department also said orders for non-defense capital goods excluding aircraft were up 0.1 percent March. They had been reported as unchanged in the previous estimate. These so-called core capital goods are seen as a measure of business confidence and spending plans.

Manufacturing, which accounts for about 12 percent of the economy, has been hurt by a strong dollar and weak global demand, which have undermined exports of factory goods, as well as efforts by businesses to reduce an inventory overhang.

Investment cuts by energy firms as they adjust to reduced profits from cheaper oil have also weighed. But some of the drag from the dollar and inventory glut is starting to ebb.

The Institute for Supply Management said on Monday a gauge of export orders received by U.S. manufacturers rose in April for a second straight month, touching its highest level since November 2014. At the same time, customer inventories fell last month to a level the ISM said was regarded as “too low.”

The dollar has declined 3.8 percent against the currencies of the United States’ main trading partners so far this year after rallying 20 percent between June 2014 and December 2015.

In March, factory orders were mixed, with orders for transportation equipment increasing 2.8 percent. Orders for machinery rose 0.5 percent and bookings for primary metals increased 0.6 percent. But orders for motor vehicles and parts fell 0.9 percent. Bookings for electrical equipment, appliances and components decreased 2.6 percent. The Commerce Department also said shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, rose 0.5 percent in March rather than the 0.3 percent gain reported last month.

Inventories of factory goods rose 0.2 percent in March after eight straight months of declines. Shipments of manufactured goods also increased 0.5 percent after falling for eight consecutive months.

The inventories-to-shipments ratio was unchanged at 1.37 in March. Unfilled orders at factories dipped 0.1 percent in March.

They have been down in three of the last four months.

Reporting By Lucia Mutikani; Editing by Andrea Ricci