Factory orders fell in April after parts shortage

Businesses cut back on their orders for heavy machinery, computers and autos in April, partly because the March earthquake in Japan has made components parts harder to come by.

Orders to U.S. factories fell 1.2 percent in April and a measure that signals business investment dropped 2.3 percent, the Commerce Department reported Thursday.

Orders to factories totaled $440.4 billion in April on a seasonally adjusted basis. That's 31.1 percent higher than the recession-low hit in March 2009.

Manufacturing has been one of the strongest areas of the economy since the recession ended. But it has shown signs of slowing in recent months. On Wednesday the Institute of Supply Management reported that its index of manufacturing activity expanded in May at the slowest pace in 20 months.

Analysts believe much of the weakness is temporary. Japan makes many of the parts used in electronics and autos assembled in the United States, so factory shutdowns there affect U.S. production. And higher energy prices have cut into consumer and business spending, limiting demand for factory goods.

Economists expect businesses will step up their purchases of manufactured goods this year to take advantage of a one-year tax break on investments in new equipment.

But many companies pulled back in April. Orders for durable goods, products expected to last at least three years, fell 3.6 percent. Demand for machinery dropped, including a sizable decline in orders for electronic turbines and generators.

Orders for computers fell 3.5 percent and demand for autos and auto parts dropped 5.5 percent.

Orders for nondurable goods rose 0.6 percent in April following a 3.1 percent increase in March. Demand for food, energy products and chemicals rose although economists said part of those gains reflected higher food and petroleum prices in the past few months.

One of the factors boosting U.S. manufacturing has been a surge in export sales. A weaker dollar has made U.S. goods cheaper in foreign markets.