Factory Orders Register First Increase of the Year

Orders to U.S. factories registered their first increase of the year in March, reflecting stronger demand for airplanes, cars and other transportation equipment.

The Commerce Department reported Wednesday that orders increased by a bigger-than-expected 1.8 percent to a seasonally adjusted $370.5 billion. Many analysts were predicting a 1.5 percent rise.

The advance followed a 0.1 percent drop in factory orders in February, according to revised figures, a better showing than the 0.4 percent decline previously reported. Factory orders fell by 4.3 percent in January.

The economic slowdown has hit the manufacturing sector hardest, causing companies to cut production, trim jobs and reduce work hours to cope with flagging demand.

Seeking to ward off recession, the Federal Reserve has slashed interest rates four times this year, totaling 2 percentage points. The reductions lower borrowing costs and are aimed at generating spending by businesses and consumers, thus boosting economic growth.

The economy grew at an annual rate of 2 percent in the first three months of this year, twice as fast as many economists had expected and double the 1 percent rate of growth registered in the fourth quarter. The stronger-than-expected first quarter performance eased recession fears.

All the strength in March factory orders came from a whopping 24.8 percent increase in orders for transportation equipment, which includes everything from cars and airplanes to ships and military tanks.

The government said gains were widespread but orders for ships and tanks led the way.

In February, orders for transportation products dipped by 0.3 percent.

Because the transportation category includes such costly items for which demand can swing widely from month to month, economists often look at another figure, which excludes transportation orders, to gauge the health of the manufacturing sector.

Excluding transportation equipment, overall factory orders fell 1.2 percent in March, the fourth straight monthly decline.

Orders for electronics and electrical equipment, including communications equipment and household appliances, decreased by 5.5 percent in March, following a 6.4 percent rise the month before.

Industrial machinery, which includes computers and machine tools, saw orders fall by 2.8 percent, on top of a 3.3 percent drop in February.

Orders for primary metals, the category that includes steel, declined by 2 percent in March, after a 1.2 percent drop. The category has posted decreases for six straight months.

Shipments, a good barometer of current demand, however, rose 0.4 percent in March, registering the first increase since August 2000. In February, shipments fell by 0.4 percent.

On Tuesday, the National Association of Purchasing Management reported that U.S. manufacturing activity declined for the ninth straight month in April, additional evidence that the sector is the weakest link in the nation's economy. But the decline was at a slightly slower rate than it was in March, encouraging some economists to wonder whether the worst of the slowdown may be over.