U.S. factory orders rise, but business equipment spending slowing

May 3 - New orders for U.S.-made goods rose more than expected in March, boosted by strong demand for transportation equipment and a range of other products, but there are signs that business spending on equipment is slowing.

A rack of SUV doors sit on a cart at the General Motors Assembly Plant in Arlington, Texas June 9, 2015. REUTERS/Mike Stone/File Photo

Factory goods orders rose 1.6 percent, the Commerce Department said on Thursday. Data for February was revised up to show orders jumping 1.6 percent instead of the previously reported 1.2 percent increase.

Economists polled by Reuters had forecast factory orders increasing 1.4 percent in March. Orders rose 7.7 percent on a year-on-year basis in March.

Orders for transportation equipment increased 7.6 percent, lifted by a 44.5 percent jump in the volatile orders for civilian aircraft. Transportation orders rose 8.9 percent in February. Orders for machinery fell 1.9 percent, the largest drop since April 2016, after rising 0.6 percent in February.

Orders for mining, oil field and gas field machinery surged 2.6 percent. Orders for motor vehicles fell 1.0 percent, the biggest drop since last July. Orders for electrical equipment, appliances and components rose 0.6 percent while bookings for computers advanced 1.0 percent.

Manufacturing, which accounts for about 12 percent of U.S. economic activity, is being supported by strong domestic and global demand. But a shortage of skilled workers and rising commodity prices after the Trump administration imposed tariffs on steel and aluminum imports are starting to impact production.

A survey on Monday showed sentiment among manufacturers falling in April for a second straight month amid growing concerns about the tariffs, which were imposed by President Donald Trump in March.

Manufacturers said the import duties had increased prices, made it difficult to source material and brought business planning to a standstill. That could undercut business spending on equipment.

Trump imposed 25 percent tariffs on steel imports and 10 percent for aluminum to shield domestic industries from what he has described as unfair competition from other countries.

The Commerce Department revised March orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans, to show them falling 0.4 percent instead of dipping 0.1 percent as reported last month.

Orders for these so-called core capital goods rose 1.0 percent in February. Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, declined 0.8 percent in March instead of the 0.7 percent drop reported last month.

Core capital goods shipments were up 1.2 percent in February.